China June CPI Slows to 1%, PPI Hits 4.1% on Energy, AI Demand

The official purchasing managers' index for June, however, showed input cost inflation easing to a six-month low of 54.2 from 60.5 in May. The output price sub-index fell to 48.2 from 51.9, marking the first contraction this year. That signals a pullback in industrial prices that had surged during the war.

The International Monetary Fund on Wednesday raised its 2024 growth forecast for China to 4.6%, up from 4.4%, citing strong high-tech manufacturing, export performance and frontloaded public infrastructure investment. The global growth forecast was trimmed to 3%.

“Many investors in China increasingly view the two-speed growth – marked by robust exports versus weak consumption and housing market – as a defining long-term feature of the Chinese economy,” said Neo Wang, China strategist at Evercore ISI. Consumer sentiment remains subdued as households grapple with the negative wealth effect from the prolonged housing downturn, Wang added.

The export-led resilience is expected to reduce pressure on Beijing to roll out new stimulus for consumer demand. “Policymakers are likely to refrain from major new stimulus unless the slowdown persists beyond the conflict,” said Gabriel Wildau, managing director at Teneo. Wildau pointed to a late-July Politburo meeting as “the next opportunity to escalate policy stimulus.”