2020.06.1006:24:00UTC+00China's Factory Gate Prices Fall At Faster Pace; Inflation Eases

China's factory gate prices fell deep into deflation in May and consumer price growth slowed for the fourth straight month, reflecting weak demand despite government measures to boost spending and exports after coronavirus pandemic hit the economy.

Producer prices fell by more-than-expected 3.7 percent on a yearly basis after declining 3.1 percent in April, data published by the National Bureau of Statistics revealed on Wednesday.

This was the biggest fall in around four years. Economists had forecast an annual drop of 3.3 percent.

The marked decline in producer prices is set to weigh on industrial profitability, which dropped at a slower pace in April.

Consumer price inflation eased to a 14-month low of 2.4 percent in May from 3.3 percent in April, data showed. Prices were expected to climb 2.7 percent. Inflation has been slowing since February.

Food prices gained 10.6 percent but slower than the 14.8 percent increase logged in April. Food inflation was largely driven by an 81.7 percent increase in pork prices. At the same time, non-food prices rose only 0.4 percent, the same rate as reported a month ago.

Food prices aside, the recent decline in inflation could be nearing an end, Julian Evans-Pritchard, an economist at Capital Economics, said.

Core inflation, which excludes food and energy prices, remained unchanged at 1.1 percent in May.

On a monthly basis, overall consumer prices decreased 0.8 percent, following a 0.9 percent drop a month ago. Likewise, producer prices were down 0.4 percent versus a 1.3 percent drop in April.