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Investing.com-- China’s consumer prices rose less than expected in July while factory-gate deflation eased, pointing to still-muted domestic price pressures despite recent signs of improvement in the world’s second-largest economy.
The consumer price index (CPI) rose 0.5% year-on-year in July, slowing from a 1.0% increase in June and reaching a 6-month low, official data from the National Bureau of Statistics of China showed on Sunday. The reading was economists’ forecast for a 0.8% rise,
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On a monthly basis, CPI fell 0.1%, compared with expectations for a 0.2% increase and a 0.3% decline in June.
The producer price index (PPI), which measures prices at the factory gate, fell 3.5% year-on-year, narrowing from a 4.1% decline in June but missing expectations for a 3.8% drop.
The biggest mover over the past few months has been the transportation fuels subcategory, which fell to just 0.8% YoY in July, down from 15.3% in June, ING analysts noted.
"Other than volatility in energy prices, we continue to see the main drags on inflation coming from food and rent," analysts wrote.
The data underscore persistent weakness in domestic demand and add pressure on policymakers to support consumption and counter deflationary forces.
"The softening inflation momentum, combined with weaker domestic economic activity starting in the second quarter, provides a solid case for a 10bp rate cut in the coming months to support growth," analysts added.
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.
