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China’s consumer prices rose faster than expected in July, according to official data, easing concerns over persistent deflation in the world’s second-largest economy.
The country’s consumer price index added 0.5 per cent last month year on year, the National Bureau of Statistics said on Friday, beating forecasts of a 0.3 per cent rise from economists polled by Reuters.
The rise was the biggest since February, when prices added 0.7 per cent, and outpaced 0.2 per cent growth in June.
Consumer price growth has remained weak in China over the past year, with frequent negative reading casting doubts over the strength of domestic demand in the midst of a three-year property slowdown.
Intense competition across Chinese industries, especially the automotive sector, have added to downward pressure on prices. Beijing has intensified its focus this year on manufacturing after a post-pandemic consumer rebound failed to materialise last year.
Producer prices, a gauge reflecting goods as they leave factory gates as well as costs of materials and commodities, were down 0.8 per cent in July, mirroring the previous month’s decline.
Core inflation, which strips out food and energy prices, was up 0.4 per cent, the NBS said, compared with 0.6 per cent in June.
Pork prices, a major component of China’s consumer goods basket, leapt 20 per cent in July, the most since late 2022. Prices have been highly volatile since outbreaks of African swine fever from 2018 to 2021 led to mass culling of herds.
Lynn Song, chief China economist for ING, said flat food prices, which had been mired in deflation for the past year, were a “big part of the increase” in overall CPI. But he pointed to drags on prices in other areas, including transport facilities due to cheaper vehicle prices, communications due to falling smartphone prices, and declining rents.
“We expect price weakness to remain in the first two categories, while we are in wait-and-see mode on the rent category as policy support for the real estate market continues to roll out,” Song said.
New home prices in May fell by the most in almost a decade, adding to concerns over the property sector. Authorities in the same month introduced measures to encourage state-owned enterprises to buy unused housing, in a bid to support the market.
Chinese authorities also unveiled unexpected cuts to lending rates last month after widespread calls for more economic stimulus.
