China’s consumer price index (CPI), the key gauge of inflation, rose by 0.5% year over year in July, marking a 0.3 percentage point acceleration from June and reflecting a move higher from the 0.2% increase seen in the prior month. This reading, released on Friday by the National Bureau of Statistics (NBS), exceeded the broad consensus from analysts who anticipated an uptick but one that would be gentler, around 0.3% year over year.
On a monthly basis, prices advanced from a 0.2% decrease in June to a 0.5% rise in July. Once again, economists had expected a firmer figure, projecting a gain of about 0.3% for the month.
One NBS statistician, Dong Lijuan, observed that the upturn in prices was driven by a rebound in demand as well as the impact of high temperatures and rainfall in various regions. This combination pushed up the prices of vegetables and eggs, components that accounted for roughly 40% of the total CPI increase. The core inflation rate, which excludes food and energy due to their volatility, climbed 0.4% from a year earlier in July.
The NBS also released the producer price index (PPI) on the same day, a measure of industrial prices, which for July showed an annual decline of 0.8 for the second consecutive month. The drop was slightly less pronounced than the market consensus, where analysts had anticipated a deeper fall, around 0.9% year over year.
Despite the ongoing downward trajectory in prices for many commodities, the data suggests that a sustained period of inflationary pressure may be easing, while domestic demand remains tepid. After 22 consecutive months of declines, the NBS continues to point to an environment of subdued demand and a downward trend in some globally traded commodities, a situation that could influence monetary policy and fiscal planning in the near term.