(Bloomberg) -- China consumer inflation accelerated and factory price deflation eased in July, as the nation’s economy continued to recover from the coronavirus crisis amid disruption from regional flooding.
- The consumer price index rose 2.7% last month from a year earlier, following a 2.5% gain in June, the National Bureau of Statistics said Monday. The median forecast was for a 2.6% increase.
- The producer price index registered a 2.4% decline on year, compared to a projected 2.5% decrease and the 3% drop in June
Key Insights
- Food prices were pushed higher in the month partly due to damage and transportation disruptions caused by floods in central and southern China
- The slowdown in factory deflation, mainly due to higher commodity and industrial product prices, bodes well for corporate profits and companies’ capability to expand investment
- “Looking ahead, we expect PPI deflation to ease in the coming months, aided by a favorable base in 2H 2019 and the rebound in commodity prices,” Bloomberg Economist David Qu wrote in a note before the data was released. “That said, PPI may remain in negative territory, given the drag from anemic domestic demand”
- Pork prices, a key element in the country’s CPI basket, rose 85.7% on the year
- Core inflation, which removes the more volatile food and energy prices, was 0.5% year-on-year, compared with 0.9% in June
- China’s economy continued its gradual recovery into the second half of the year, driven by production resumptions and the release of pent-up demand. But whether that momentum can be sustained depends at least in part on how fast demand can catch up with production and how China copes with uncertainties including Sino-U.S. tensions and new virus outbreaks
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