China inflation: consumer prices ‘close to a peak, will drop back’ despite hitting highest level in 2 years in July
- China’s consumer price (CPI) index rose by 2.7 per cent in July from a year earlier, up from a rise of 2.5 per cent in June
- Producer price index (PPI), which reflects the prices that factories charge wholesalers for products, rose by 4.2 per cent in July, down from a rise of 6.1 per cent in June
Despite hitting its highest level in two years last month, China’s consumer inflation is unlikely to breach the government’s target as stabilising pork prices and still-depressed growth momentum suggest limited further growth potential, analysts said.
The producer price index (PPI), which reflects the prices that factories charge wholesalers for products, also fell short of expectations after slowing for the ninth consecutive month to 4.2 per cent growth in July year on year, down from a rise of 6.1 per cent in June.
That is still very low by global standards, and we think headline inflation is close to a peak and will drop back over the coming quarters
“We think factory gate inflation will remain on a downward trajectory throughout the rest of the year amid a further drop in commodity prices, easing supply bottlenecks and a higher base for comparison,” said Huang Zichun, China economist at Capital Economics.
