China's factory gate prices fell at the fastest pace in seven years in May and quicker than forecasts, as faltering demand weighed on a slowing manufacturing sector and cast a cloud over the fragile economic recovery.
As rising interests rates and inflation squeeze demand in the United States and Europe, China is in contrast battling a sharp decline in prices with factories receiving less for their products from key overseas markets.
China's economy grew faster than expected in the first quarter, but recent indicators show demand is rapidly weakening with exports, imports and factory activity falling in May. The Australia dollar eased 0.2% to $0.6704, tracking a fall in the Chinese currency yuan after the inflation data.The government has set a target for average consumer prices in 2023 to be about 3%. Prices rose 2% year-on-year in 2022.
"So far, monetary policy and fiscal policy have remained tight, along with lower income growth, so domestic demand is depressed," said Dan Wang, chief economist at Hang Seng Bank China.
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