China’s consumer sector slipped into deflation for first time in more than two years in July, factory-gate prices fell for 10th straight month
DATA MACRO
China’s consumer sector slipped into deflation for first time in more than two years in July, factory-gate prices fell for 10th straight month
DATA MACRO

China’s consumer sector slipped into deflation for first time in more than two years in July, factory-gate prices fell for 10th straight month

 

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China’s consumer sector slipping into deflation for the first time since February 2021, as the world’s second-largest economy struggled to boost domestic demand and pressure mounted on the government to introduce more policy stimulus.

China’s Consumer Price Index (CPI) declined by 0.3% in July from a year earlier, marking the first drop in 29 months, according to data released by the National Bureau of Statistics on Wednesday. That’s compared to zero growth in June and the 0.5% drop expected by the market.

Food price declined by 1.7% in July from a year earlier, contributing to 0.31 percentage point to the CPI drop, according to the NBS.

Pork price slid 26% year over year in July, widening by 18.8 percentage points from the previous month, and fresh vegetable price fell by 1.5%, compared to 10.8% gain in June, showed the data.

Non-food prices in July remained in line with the year-ago level, compared to 0.6% drop in June, and service price grew by 1.2%, picking up by 0.5 percentage point from the month before.

Flight ticket prices rose by 11.9% in July from a year earlier, compared to 5.8% gain in June; prices of hospitality, tourism, and movie/show tickets rose by 13.2%, 13.1% and 5.9%, respectively, all accelerating from the previous month, said the NBS.

Core inflation, which excludes food and fuel prices, picked up to 0.8% on-year from 0.4% in June.

The year-on-year drop in CPI will be temporary, and as China’s economic recovery continues, market demand expands steadily and market demand and supply balance improves and the effect of high comparison base last year eases, CPI is expected to rebound, said a spokesperson of the NBS.

China’s producer price index (PPI) declined for a 10th consecutive month, falling by 4.4% from a year earlier, narrowing by 1.3 percentage points from the previous month, according to NBS data.

Driven by rising crude oil and non-ferrous metal prices in the global market, prices in China’s domestic oil and gas mining and non-ferrous metal smelting industries returned to growth in July, it said.

In addition, price in cement production fell by 6.5% in July from the previous month and price of glass production fell 2.9%, showed NBS data.