China reported stable consumer price growth and a significantly narrowed decline in producer prices in June as warming consumer sentiment continued to drive domestic demand.

The consumer price index (CPI), a main gauge of inflation, was up 0.2 percent year on year last month, the National Bureau of Statistics (NBS) said Wednesday. Although it was slightly lower than the 0.3 percent increase in May, the price level has maintained the rising trajectory for five consecutive months.

The core CPI, deducting food and energy prices, went up 0.6 percent, flat with that in May, the official data showed.

The supply at the consumer market was sufficient and the prices maintained moderate growth, NBS statistician Dong Lijuan said when commenting on the figures.

A breakdown shows, non-food prices rose 0.8 percent year on year in June due to a 3.1 percent energy price uptick and a 3.7 percent increase in tourism-related prices.

Food prices declined 2.1 percent year on year in June as the abundant supply of fresh vegetables, eggs, beef, and mutton, among others, dragged down the overall price level. Bucking the trend, pork prices surged 18.1 percent.

The industrial price level in June also sent a signal of recovering domestic demand.

The producer price index, which measures costs for goods at the factory gate, went down 0.8 percent year on year last month, marking a significant narrowing from a 1.4 percent drop in May and a 2.5 percent decrease in April.

Analysts said the latest data showed a robust domestic market with consumers more willing to spend and factories speeding up production.

Driven by the holiday economy, the service sector and consumption have witnessed rapid recovery this year and the industrial sector also achieved fast expansion with steady transformation and upgrades, said Wang Jinbin, deputy dean of School of Economics, Renmin University of China.

From the Spring Festival to May Day and the Dragon Boat Festival, this year's holidays have seen a rapid recovery in cultural and tourism consumption vitality.

As the bustling summer vacation season has kicked off, the country is gearing up for a substantial surge in travel and tourism. About 860 million railway passenger trips are expected in July and August, showing strong travel demand driven by summer vacationers, tourists and family visitors.

The authorities have strengthened policy support to unleash the potential of domestic demand.

China initiated a new round of consumer goods trade-ins in March. With more subsidies and incentives, the program has led to rising sales of products such as cars, home appliances and furniture.

The sales of new energy passenger vehicles by unit soared 38.5 percent year on year in May. The sales value of home appliances and furniture climbed 12.9 percent and 4.8 percent, respectively.

Looking forward, analysts believe the domestic demand will continue to improve in the second half of this year amid the steady economic recovery and strengthening supportive policies, which will result in a mild consumer inflation and a further narrowing of the producer prices.

The consumption will keep improving in the rest of the year and remain the primary driving force of the economy, said Lian Ping, head of the Guangkai Chief Industry Research Institute. 

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