Photo: Chen Xia/GT

China's consumer price index (CPI), the country's main inflation gauge, could fall below 3 percent in May, as consumption has yet to return to its full potential while supplies increase, according to experts and economists.

On Wednesday, China will release May CPI data.

"It's highly likely that March CPI will decelerate back to 2.6 percent - the normal level before the pandemic - since supplies picked up while consumption still being restrained," said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.

China's CPI rose 3.3 percent year-on-year in April, down 1 percentage point from the previous month's reading, according to the National Bureau of Statistics (NBS). In January, the index rose 5.4 percent year-on-year, its highest increase since November 2011.

Experts noted that some of the reasons for the continuing decline included an abundant supply of fresh vegetables on the market, while catering consumption continues to struggle, affecting demand and causing pork and vegetables prices to drop. 

"Although the government has launched a series of stimulus measures to spur consumption, including consumption vouchers, people may still have some reluctance as pandemic worries still linger on," Dong said on Sunday.

CPI and PPI inflation likely both fell further in May. The average year-over-year growth for both will likely be negative, Goldman Sachs economists said in a report sent to the Global Times, noting that "this may lead to more concerns about deflation and should imply more pressures to loosen monetary policy all else equal."

The same report also said that "although recent days have seen market concerns over whether the central bank has turned incrementally more hawkish, we still expect the government to take a supportive policy stance."

Dong noted the CPI would not likely to decline further for the second half of 2020 but would bounce back amid consumption recovery.

According to the Government Work Report released in May, China aims to keep its inflation rate at 3.5 percent for 2020, the highest in five years, in efforts to stabilize livelihoods by balancing policy priorities and leaving sufficient room for monetary policies.