China's PPI continues to drop in May

China's producer price index (PPI), which measures costs of goods at the factory gate, dropped 3.7 percent year-on-year in May, the National Bureau of Statistics (NBS) said on June 10.

The decline widened from the 3.1-percent decrease in April, NBS data showed.

On a month-on-month basis, the PPI fell 0.4 percent last month, narrowing from the 1.3-percent drop in April.

In the first five months, the average PPI fell by 1.7 percent over the same period last year.

Factory prices of production materials dropped 5.1 percent year-on-year in May, dragging down the overall PPI by 3.79 percentage points.

The PPI data came along with the release of the consumer price index, which rose 2.4 percent year-on-year in May, easing from the 3.3-percent growth in April.

Citing the narrowing trend in month-on-month PPI reading, NBS senior statistician Dong Lijuan said industrial production further rebounded last month with an improvement in market demand.

Dong attributed the sharper annual PPI decline in May mainly to a higher comparison basis in the same period last year.

Wen Bin, chief analyst at China Minsheng Bank, said the May PPI fell more than expected due to the impact of the COVID-19 epidemic on domestic enterprises, as well as the low international oil prices that dampened prices of production materials.

However, with inflation continuing to ease, China will enjoy greater room for monetary policy, stated Wen in a co-authored research note. He suggested monetary policies to further focus on stabilizing employment and ensuring people's lives, as well as increasing support for small firms.