The latest official data shows that China’s Consumer Price Index (CPI) rose by 0.5% year-on-year in July, but the core CPI slowed to a six-month low. Analysts point out that there is no sign of a recovery in domestic demand.
On August 9, data released by the National Bureau of Statistics of the Communist Party of China showed that the CPI rose by 0.5% year-on-year in July, an increase of 0.3% from the previous month. The core CPI, which excludes food and energy prices, saw a decrease in the year-on-year growth rate, dropping by 0.2 percentage points to 0.4%, hitting a six-month low. The Producer Price Index (PPI) fell by 0.8% year-on-year, unchanged from the previous month.
According to Caixin, the price hike of pork, the impact of high temperatures and heavy rainfall in some areas causing vegetable and egg prices to rise after dropping, as well as the continuous recovery in consumer demand due to summer travel, led to an increase in the CPI Month-on-Month. However, the year-on-year growth rate of the core CPI has slowed down.
Meanwhile, due to insufficient market demand and the downward pressure on some international commodity prices, the year-on-year and month-on-month declines in the PPI remained unchanged from the previous month.
The month-on-month decrease in the PPI in July was 0.2%, the same as the previous month. Among them, the prices of production materials fell by 0.3%, with a widening decline of 0.1% from the previous month; the prices of daily necessities changed from a 0.1% decrease in the previous month to remain stable.
Reuters analysis on the 9th stated that the rate of CPI increase in July was higher than expected, partly due to weather disturbances affecting food supplies; the tightening situation of the PPI continues to exist, indicating insufficient enthusiasm in manufacturing activities. This is due to the weak domestic consumption demand in China, and weak domestic demand is a major pain point in the economy.
Zhou Maohua, a macroeconomic researcher at Everbright Bank’s financial market department, stated that prices continue to remain low, reflecting the imbalance in domestic supply and demand, insufficient effective demand, continued discounting in the industrial sector, overall weak willingness for production expansion and investment among enterprises, insufficient activity at the micro level, and the need for strong support from macroeconomic policies.
Xu Tianchen, senior economist at The Economist Intelligence Unit, pointed out that upon observing the data, it is evident that other goods and services are not showing signs of inflation, indicating that there is no sign of a recovery in domestic demand.
Nie Wen, Chief Economist at HuaBao Trust, stated that overall, prices remain weak, and the pattern of insufficient demand is unlikely to significantly change in the second half of the year.