Key facts
- China's producer prices rose 3.5% year-on-year in July, slowing from 4.1% in June.
- The July producer price index increase was below the 3.8% forecast.
- Consumer price inflation rose 0.5% year-on-year in July, down from 1% in June.
- Consumer prices were unchanged month-on-month in July.
- Core inflation, excluding food and energy, rose 0.8% year-on-year in July.
- Producer prices fell 3.6% year-on-year in July, according to NBS data, matching June's low.
China's producer prices rose 3.5% year-on-year in July, marking a fifth consecutive month of increases but at a slower pace than the 4.1% seen in June. This figure fell short of the 3.8% increase forecast by economists in a Reuters poll. Consumer price inflation also cooled, with the consumer price index (CPI) rising 0.5% year-on-year, down from 1% in June and below the expected 0.8% rise.
On a monthly basis, China's CPI fell 0.1% in July, contrasting with expectations of a 0.2% gain and following a 0.3% dip in June. However, another report indicated that producer prices retreated 3.6% year-on-year in July, matching the nearly two-year low recorded in June, and worse than economists' forecast of a 3.3% decline. This data suggests persistent deflationary pressures and weak domestic demand.
Despite the overall flat consumer price index, core inflation, which excludes volatile food and energy prices, rose 0.8% year-on-year in July, reaching its highest level in 17 months. This indicates growing momentum in domestic demand, particularly in the services sector, which saw a significant month-on-month increase driven by higher prices for air travel, tourism, and accommodations due to the summer travel season. Food prices, however, declined by 1.6% year-on-year.
Analysts remain divided on whether these figures signal an end to deflationary pressures. Some point to improvements in monthly PPI and core CPI, expecting policy measures to lift annual PPI from August. Others remain cautious, citing the ongoing property market downturn, weak labor market, and reliance on external demand, suggesting that demand-side stimulus may be needed for a sustained impact.