China’s consumer deflation extended into a fourth month, as price wars intensified while a spending boost during two national holidays failed to offset the drag from weak domestic demand.

The consumer-price index fell 0.1% in May from a year earlier, the National Bureau of Statistics said Monday, same as the drop in the previous month. The median forecast of economists surveyed by Bloomberg was minus 0.2%.

Factory deflation persisted into a 32nd month, with the producer price index recording a faster drop of 3.3% compared to April, the worst decrease in nearly two years.

The threat of entrenched deflation in China will likely linger for months to come as consumers hunker down after a prolonged property slump and companies become mired in price wars. In the latest example of cutthroat competition, carmaker BYD Co. slashed prices by as much as 34% on almost a dozen of its electric and plug-in hybrid models, stoking concerns of another wave of discounting in the EV market.

Holidays at the beginning and end of May brought temporary respite, however, when demand for services heated up during a popular time for travel and visiting family.

Dong Lijuan, chief statistician at the NBS, blamed the steep decline in producer prices on a high base last year and a drop in global prices for oil products and chemicals. Meanwhile, prices of coal and other raw materials at home declined because of ample inventory, furthering dragging down the index, she said in a statement accompanying the data release.

Risks from trade tensions with the US may get in the way of faster price growth, even as the two countries agreed to continue talks after a call last week between Donald Trump and Xi Jinping. Their top trade negotiators are set to hold fresh talks in London on Monday, offering a glimmer of hope that the world’s two largest economies can defuse tensions.

Losses in jobs and incomes caused by US tariffs threaten to weaken the ability and willingness of Chinese consumers to spend, likely prompting manufacturers and service providers to cut prices.

Morgan Stanley economists led by Robin Xing said last week that they see deflation “getting deeper, not better,” warning China’s economic growth may decelerate quickly in the second half of the year “with slower exports and a sluggish consumption appetite.”

The International Monetary Fund projects China’s consumer inflation will average zero this year, the lowest of the almost 200 countries it covers. That would be the weakest reading for China since 2009, when the global financial crisis hammered exports.

The latest monthly surveys of purchasing managers showed output prices weakening both in manufacturing and services. In May, the rate of discounting in the services sector reached the steepest in eight months, according to a report last week from Caixin and S&P Global.

A recent Bloomberg survey of 67 economists also showed deflationary pressure is expected to get worse in China.

Consumer prices will likely increase by just 0.3% in 2025 from a year ago, the lowest projection since Bloomberg began polling the question in 2023. Producer prices are now expected to decline 2% this year, worse than the 1.8% previously estimated by the economists, according to the survey.