China's consumer price index rose just 0.5% year-on-year in July, the slowest pace of price growth in six months, while factory-gate prices fell 3.5%, narrowing from June's decline. The figures point to persistent weakness in domestic demand and add to the case for further policy easing in the world's second-largest economy.
China's consumer price index rose 0.5% year-on-year in July, official data from the National Bureau of Statistics showed Sunday. That is down from a 1.0% increase in June and below economists' forecast for a 0.8% rise, marking a six-month low. On a monthly basis, CPI fell 0.1%, compared with expectations for a 0.2% increase and a 0.3% decline in June.
The reading points to still-muted domestic inflation pressures, even as other data have hinted at improvement in the broader economy.
Factory-gate deflation narrows
The producer price index, which tracks prices at the factory gate, fell 3.5% year-on-year. That narrowed from a 4.1% decline in June but missed forecasts for a 3.8% drop. The transportation fuels subcategory was the biggest mover, falling to just 0.8% year-on-year in July, down from 15.3% in June, ING analysts noted.
ING analysts pointed to persistent drags on inflation from food and rent outside of energy-price swings: "the main drags on inflation coming from food and rent".
Case builds for a rate cut
The softening price trend, combined with weaker economic activity since the second quarter, builds a case for a 10-basis-point interest rate cut in the coming months to support growth, ING analysts added. The data underscore persistent weakness in domestic demand and add pressure on policymakers to support consumption and counter deflationary forces.
China's economy has faced weak household spending and prolonged pressure in the property sector, while manufacturers have grappled with excess capacity and intense price competition.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
