by XIN Yuan

China's consumer prices held steady while factory-gate inflation reached a yearly high in May, as rising energy and commodity costs lifted production prices, though economists said domestic demand remained relatively soft.

Data released by the National Bureau of Statistics (NBS) on Wednesday showed the consumer price index (CPI) rose 1.2% year on year in May, unchanged from April. The producer price index (PPI) increased 3.9%, up from 2.8% in April and marking its fastest growth so far this year.

According to DONG Lijuan, chief statistician at the NBS, industrial consumer goods prices rose 3.9% from a year earlier, contributing about 1.18 percentage points to CPI growth. Gasoline prices increased 23.5%, partly due to a lower comparison base a year earlier, while gold jewellery prices rose 39.0%.

Food prices remained a drag on inflation, falling 1.7% year on year. Pork prices dropped 16.1%, while non-food prices rose 1.9% and service prices increased 0.8%.

Core CPI, which excludes food and energy prices, rose 1.1%, easing from 1.2% in April and indicating that underlying inflation remained modest.

On a monthly basis, CPI fell 0.1% after rising 0.3% in April.

FENG Lin, executive director of research at Golden Credit Rating, told Jiemian News that imported inflation pressures linked to Middle East tensions remained elevated, while the low level of core inflation suggested there was still room for further consumption-support measures.

Producer prices continued to strengthen as higher commodity prices pushed up industrial costs.

Prices of production materials rose 5.2% year on year, contributing more than 4 percentage points to headline PPI growth. Among major industries, non-ferrous metal mining prices surged 36.5%, while non-ferrous metal smelting and processing prices rose 24.0%.

At the same time, some downstream sectors remained under pressure. Prices in non-metallic mineral products fell 5.1%, while automobile manufacturing prices declined 2.0%.

WANG Qing, chief macro analyst at Golden Credit Rating, said the recent acceleration in PPI was mainly driven by imported supply shocks rather than stronger domestic demand.

He expects PPI inflation could rise to around 4.0% in June, supported by higher oil and semiconductor prices, though a sustained surge is unlikely unless geopolitical tensions intensify further.

Economists expect price trends to remain uneven across sectors.

WEN Bin, chief economist at China Minsheng Bank, said upstream industries were benefiting from higher commodity prices, while downstream consumer sectors continued to face relatively weak demand. He added that the transmission from producer prices to consumer prices remained limited.

ZHANG Di, a macro analyst at China Galaxy Securities, said the current rise in prices was still largely cost-driven, suggesting profitability may improve for upstream producers while many midstream and downstream manufacturers continue to face margin pressure.