Chinese consumer prices held steady in May as per official data released on Wednesday, indicating a diminishing impact from surging energy costs. Concurrently, rising demand for AI-related tech products contributed to a third consecutive monthly increase in factory gate expenses.
The ongoing uptick in inflation coincided with recent statistics demonstrating a surge in imports and exports driven by the need for tech components and machinery. The consumer price index (CPI), a vital gauge of inflation, stood at 1.2 percent last month, matching April figures and slightly below expectations from a Bloomberg economist survey.
This figure remained significantly below the government’s annual target of two percent. On a monthly basis, the CPI experienced a 0.1 percent decline compared to a 0.3 percent uptick in April, primarily influenced by alterations in energy and service costs, according to Dong Lijuan, a statistician at the National Bureau of Statistics (NBS).
Lijuan specified that the 12.6 percent surge in domestic gasoline prices from the previous month reversed to a 0.3 percent decrease, resulting in a 0.1 percent dip in energy prices for May, in contrast to the 5.7 percent rise observed in April. The producer price index, which gauges wholesale inflation, climbed to 3.9 percent, up from 2.8 percent in April and aligning with Bloomberg’s predictions.
This marked the fastest pace since July 2022 when the PPI registered at 4.2 percent. The index had been in negative territory since October but only turned positive in March this year. The consistent escalation was attributed to factors like heightened demand in specific domestic sectors and the transmission of fluctuations in global commodity prices, mentioned Dong.
He highlighted that the surge in electrification, extensive integration of AI across various sectors, and increased demand for computing power were key drivers behind the price hikes in computing-related industries. Zhiwei Zhang, the president and chief economist at Pinpoint Asset Management, correlated China’s future export expansion with the flourishing AI industry.
Zhang expressed optimism, stating, “As the AI sector’s growth momentum is poised to continue in the near future, China’s export growth and PPI inflation are likely to remain robust.”
