China inflation slows in June as domestic demand remains weak

China’s consumer inflation slowed in June, official data showed Thursday, as weak domestic demand continued to weigh on prices despite rising factory-gate inflation.

The consumer price index rose 1% year-on-year in June, slowing from 1.2% in May and missing market expectations of 1.1%, according to the National Bureau of Statistics.

Core inflation, which excludes volatile food and energy prices, also eased to 1% from 1.1% the previous month.

Food prices fell 1.6% from a year earlier, compared with a 1.7% decline in May.

Producer prices, meanwhile, rose 4.1% year-on-year in June, accelerating from 3.9% in May and marking the fastest increase since July 2022.

On a monthly basis, the producer price index fell 0.3%, showing that annual factory-gate inflation was partly supported by base effects.

Higher energy and commodity costs linked to the Middle East conflict have pushed up input prices, while weak household demand has limited companies’ ability to pass those costs on to consumers.

China’s economy continues to show uneven momentum, with exports and high-tech manufacturing remaining resilient, while consumption and the property sector stay under pressure.

The International Monetary Fund on Wednesday raised its 2026 growth forecast for China to 4.6% from 4.4%, citing strong high-tech manufacturing, exports, and public infrastructure investment.

China has set an official growth target for this year of 4.5%-5%.