Ammon News - China's producer deflation deepened to its worst level in almost two years in June as the economy grappled with uncertainty over a global trade war and subdued demand at home, piling pressure on policymakers to roll out more support measures.

While consumer prices rose for the first time in five months, the uptick was marginal as a prolonged housing market downturn in the world's second-biggest economy added to headwinds from U.S. President Donald Trump's tariffs on trading partners.

The producer price index fell 3.6% in June from a year earlier, worse than a 3.3% decline in May and the largest drop since July 2023. That compared with forecast of a 3.2% slide in a Reuters poll.

Some export-oriented industries are under pressure in price terms, said Dong Lijuan, NBS statistician.

"The uncertainty in the global trade environment has affected the export expectations of enterprises," Dong said.

China's factory activity shrank for a third month in a row in June, albeit at a slower pace, with employment and new export orders still languishing.

"We expect demand to weaken later this year, as exports slow and the boost from fiscal support diminishes," said Zichun Huang, China economist at Capital Economics.

Market reaction to the data was cautious as Trump ramps up his trade war. China's Shanghai Composite Index was up 0.3% by the midday break, while Hong Kong’s benchmark Hang Seng traded down 0.7%. Reuters