China's producer price index (PPI) contracted 1.4 percent year on year in May, following a 2-percent decline in April, data from the National Bureau of Statistics (NBS) showed on Tuesday.

The index edged down 0.1 percent in May from the previous month.

Both the year-on-year and month-on-month decreases narrowed from those in the previous month, signalling rebounding market demand in industrial products, said Yu Qiumei, a senior statistician with the NBS.

The index, which measures inflation at the wholesale level, has been in deflationary territory for 27 consecutive months, the longest drop since the 1990s.

Among the 30 main industries surveyed, 16 sectors including oil and gas exploration posted month-on-month price increases in May. The remaining sectors, including non-ferrous metal smelting production, posted month-on-month price drops.

China's consumer price index, a main gauge of inflation, increased 2.5 percent year on year in May, up from 1.8 percent in the previous month, the NBS said on Tuesday.