China experienced a 3.3% year-on-year decline in producer prices in May 2025, slightly surpassing the anticipated 3.2% decrease after a 2.7% drop in April. This marks the 32nd consecutive month of deflation in producer prices and is the sharpest fall since July 2023. The decline is attributed to escalating external risks, primarily due to the uncertainty surrounding US tariffs and the persistently weak domestic demand.
The cost of production materials fell more rapidly, declining by 4.0% compared to a 3.1% reduction in April. The mining sector saw a sharper decline of 11.9% versus 9.4%, and raw material prices dropped by 5.4% from 3.6%. Processing prices experienced further decreases, falling by 2.8% against the previous 2.3%.
Consumer goods prices remained sluggish, with a decline of 1.4% compared to 1.6% previously, impacted by dips in durable goods prices, which fell by 3.3% after a 3.7% decrease, and in food, which continued to decline by 1.4%. Clothing prices stabilized, showing no change compared to a 0.1% decline previously, while the prices of daily-use goods increased by the same pace as before, at 0.6%.
On a monthly basis, the Producer Price Index (PPI) contracted by 0.4% in May, mirroring April's rate and marking the most significant monthly decline in six months. Over the first five months of the year, factory-gate prices have slipped by 2.6%.
