Prices at factory gates in China have dropped again. Photo: AFP

China’s factory-gate prices remained at four-year lows in May, official data showed Wednesday, as the demand shock from the coronavirus continued to take a toll on the world’s second-largest economy.

The producer price index (PPI), which measures the cost of goods at the factory gate, deepened its contraction last month, shrinking 3.7% on-year.

The figure was worse than the 3.2% fall expected by analysts in a Bloomberg survey, and was deeper than April’s 3.1% contraction – underscoring the stress faced by manufacturers as China’s economy churns back to life after pandemic lockdowns.

China’s consumer price index (CPI) rose 2.4% in May, just below the 2.6% expected and easing from 3.3% a month earlier, according to data from the National Bureau of Statistics.

The country has been working to bounce back from a historic contraction in growth in the first three months as the coronavirus outbreak brought activity to a near-standstill while authorities worked to curb its spread.

But the march of the virus around the world, hammering the global economy, has depressed demand across many of China’s key trading partners, forcing companies to charge less for their products.

Dong Lijuan, a senior statistician at the statistics bureau, said Wednesday the PPI drop was influenced by a fall in prices in the oil industry and other major commodities.

Another key factor behind the easing of consumer prices is China’s slowing food price inflation, Dong added, with more fresh produce entering the market and an increase in pork supply.

Consumer inflation had remained close to eight-year highs in the earlier part of 2020, and pork prices have been soaring after the country’s herds were ravaged by African swine fever that saw millions of pigs culled.

The price of pork, a staple meat in China, rose 81.7% on-year last month, down from a 96.9% rise in April and 116.4% spike in March.