China’s reflation trend continues to solidify in World Economy News 11/06/2026 CPI inflation steady in May as higher energy is offset by slumping food and rental prices China’s CPI inflation remained unchanged at 1.2% year-on-year in May, marginally softer than our forecast and market expectations for a slight uptick to 1.3%. Inflation has been at or over 1% for the past 4 months, and in positive territory for 8 straight months, suggesting the reflation trend is solidifying. Consumer prices were supported by a major surge in the transportation fuels subcategory, which rose 21.1% YoY in May, reflecting higher oil prices. While local gasoline prices generally didn’t rise as much as Brent crude oil, we saw moves of around 24% above pre-Iran War levels. If crude oil prices remain elevated for longer, pump prices could rise further. Most inflation subcategories were fairly stable in May. Clothing (1.4%), healthcare (2.1%), and Education, Culture, and Entertainment (1.3%) were all within 0.1pp of April’s data. Two main categories continue to hold back inflation: First, food inflation fell further to -1.7% YoY in May, as pork (-16.1%), fresh fruit (-2.2%), dairy (-1.2%), and edible oil (-1.2%) remained in deflationary territory. China’s pork cycle has taken longer than normal to turn. This has been attributed to rising production efficiency, while purchase agreements to import soybeans could also be contributing to low feed prices. Second, housing inflation remained negative for a sixth consecutive month. Rental prices fell -0.6% YoY, as the property market has yet to confirm a bottom. We’ve seen some positive signals in the recent monthly property price data. They include stabilisation in tier-1 cities and an overall slower pace of price declines. This drag, though, is likely to continue in the near term. These factors will likely keep China’s CPI inflation at positive but low levels moving forward. Higher energy having clearer upward impact on PPI inflation PPI inflation