China's Consumer Prices Rise Slower Than Expected in June Amid Weak Demand

China's consumer prices grew slower than expected in June, while wholesale inflation accelerated, as elevated energy costs continued to sap domestic demand.

Consumer prices rose 1% in June from a year ago, missing economists' estimates of 1.1% growth in a Reuters poll, and slowing from 1.2% in May, according to data released by the National Bureau of Statistics on Thursday.

Core CPI, excluding volatile food and energy prices, also rose 1% in June from a year earlier, edging down from the 1.1% increase in May. Food prices declined 1.6% from a year earlier, easing from a fall of 1.7% in May.

The producer price index jumped 4.1% from a year earlier, in line with economists' forecast and outpacing May's 3.9%.

Factory-gate prices had returned to growth in March with input costs rising on the back of the Middle East conflict, helping end one of China's longest deflationary streaks in decades. Besides higher commodity costs owed to war-led supply disruptions, wholesale prices were also lifted by a growing demand for artificial intelligence computing power, pushing up prices for tech equipment and semiconductors.

June's official PMI, however, showed input cost inflation easing to a six-month low of 54.2 from 60.5 in May, while the output price sub-index fell to 48.2 from 51.9 — the first contraction this year, signaling a pullback in upstream and lower-stream industrial prices that had soared higher during the war.

The International Monetary Fund on Wednesday forecast China's economy to outperform the world this year, raising their growth forecast for China to 4.6%, up from its previous projection of 4.4%, while trimming global growth forecast to a sluggish 3%. China has set a modest growth target of 4.5%-5% this year.

They attributed that optimistic view to China's robust high-tech manufacturing and export performance, as well as frontloaded public infrastructure investments.