Chinese CPI inflation is likely to have slowed slightly last month on weaker food price inflation. According to a Societe Generale’s research report, the CPI inflation slowed to 2.2 percent y/y. Last month, vegetable prices continued to face downward pressure; however, it is expected to have been countered, partially though, by higher pork prices. All in all, food price inflation is expected to have slowed last month, weighing on the headline print.
In the mean time, housing inflation is expected to have accelerated, whereas other categories might have weakened slightly. According to the official PMI report, input price index fell to 55.3 in May from 57.6. This is still a robust figure. This suggests that producer price index might have gained further on a month-on-month basis. Therefore, the PPI contraction rate in annual terms is expected to have narrowed further to -3.1 percent from -3.4 percent, noted Societe Generale.
