China Macro: Inflation monitor: PPI pass-through continues; CPI points to softer demand

Research evidence excerpt

China Macro: Inflation monitor: PPI pass-through continues; CPI points to softer demand

Deutsche Bank

Research

Economics Date

China Macro 10 June 2026

Inflation monitor: PPI pass-through continues;

Deyun Ou CPI points to softer demand

Economist

+852-2203-6166

China’s PPI reflation continued as expected in May, while the underlying drivers

are shifting. Headline PPI inflation rose to 3.9% YoY, accelerating by 1.1ppt from Yi Xiong, Ph.D.

April. On a MoM basis, PPI inflation moderated by 1.2ppt from the previous Chief Economist

+852-2203-6139 month but remained positive at 0.5% MoM. With international oil prices broadly

stable during the month, oil-related sectors saw a small MoM drop in prices.

Meanwhile, the pass-through of earlier energy price increases to mid- and

downstream sectors continued, with chemicals, ferrous metals and textiles all

registering faster sequential price gains. In addition, AI-related demand

continued to push up prices in non-ferrous metals such as tin and copper,

electrical machinery, optical fibers, wires and cables, as well as computers.

Looking ahead, we maintain our forecast that PPI inflation will rise to around 5%

by year-end, averaging 3.3% in 2026. While energy prices were the key driver in

March and April, the focus ahead will be on the breadth of pass-through to mid-

and downstream sectors, as well as the strength of AI-related demand.

Headline CPI inflation was unchanged at 1.2% YoY, but the breakdown points to

softening domestic demand. Sequential inflation turned negative, falling 0.1%

MoM after a 0.3% increase in April. Services, food, household goods and autos all

saw MoM declines and slower YoY inflation, pointing to softer consumer demand.

Energy prices declined 0.1% MoM, compared with a 5.7% rise in the previous

month.