Chinese consumer inflation decreased in July, indicating that local liquidity and expenditure were still weak amid sluggish company activity, while factory gate inflation continued to reduce throughout the month. Data from the National Bureau of Statistics indicated on Wednesday that consumer price index (CPI) inflation decreased 0.3% in the 12 months leading up to July, …
Chinese consumer inflation decreased in July, indicating that local liquidity and expenditure were still weak amid sluggish company activity, while factory gate inflation continued to reduce throughout the month. Data from the National Bureau of Statistics indicated on Wednesday that consumer price index (CPI) inflation decreased 0.3% in the 12 months leading up to July, which was somewhat better than forecasts calling for a decline of 0.4%.
The CPI has now decreased annually for the first time since September 2021, following a flat result for June. CPI inflation increased by 0.2% compared to the previous month, significantly exceeding the 0.1% growth forecast. Although the monthly figure indicates a slight improvement in consumer inflation, a decline in the yearly reading implies that the factors reducing inflation in China—weak spending and decreasing economic growth—remain active. Additionally, it shows that the second-largest economy in the world did not much recover follow a disastrous second quarter. The majority of this weakness is attributable to China’s manufacturing sector slowing down, with little sign of turnaround in the sector indicated by the continued contraction in producer price index (PPI) inflation. PPI inflation shrank 4.4% in July, more than expectations for a drop of 4.1%. Despite some improvement from the 5.4% loss in June, the reading was still very close to its lowest points since the 2016-yuan crisis. The weak inflation numbers came after information on Tuesday revealed that Chinese exports and imports declined even lower in July. According to data released last week, the growth in Chinese business activity deteriorated during the month.
Beijing is likely to increase its stimulus programs in response to the negative economic trends as it works to support the post-COVID recovery. However, little information has been provided by Chinese officials to date regarding their plans to support the economy. The People’s Bank of China may take additional liquidity measures in response to worsening inflation, state media reports claiming that the bank will need to further lower mortgage and deposit rates to support the economy.
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