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China inflation
EconomyEconomic Indicators

Explainer | China inflation surprise ‘not a recovery in final demand’: 4 takeaways from July’s data

  • China’s consumer price index (CPI) grew by 0.5 per cent in July, while the producer price index (PPI) fell in line with expectations

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An employee works on inflatable swimming products for export at a factory in Suqian, in eastern China’s Jiangsu province. Photo: AFP
Andrew Mullen
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1. CPI’s surprise rebounds amid smaller drag from food

China’s consumer price index (CPI), a key gauge of inflation, grew in July by 0.5 per cent, year on year, after rising by 0.2 per cent in June, with analysts pointing to how food inflation snapped a 12-month streak of negative inflation to offset a slight dip in non-food inflation that pushed the overall CPI to a five-month high.
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The overall CPI reading beat the expected 0.29 per cent growth projected by economists polled by Chinese financial data provider Wind.

Within the CPI, food prices remained unchanged in July from a decrease of 2.1 per cent in June, while non-food prices increased last month, year on year, rising by 0.7 per cent after having risen by 0.8 per cent in June.

Higher pork and vegetable costs drove up the overall prices, with pork prices seeing the fastest year-on-year growth since 2022.

In contrast, non-food inflation moderated slightly, dragged by down by transport facilities, communications facilities and rents.

On a month-on-month basis, China’s CPI in July rose by 0.5 per cent following a 0.2 per cent decrease in June.

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“The surprising rise in CPI inflation was mainly led by strong food price inflation, which was largely driven by adverse weather conditions in parts of the country, including both extremely high temperatures and flooding,” said analysts at Nomura.

2. Factory-gate prices remain soft

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