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Consumer prices in China rose faster than expected in July, easing fears of persistent deflation in the world’s second-largest economy, official data showed.
The country’s consumer price index rose 0.5 percent last month on an annual basis, the National Statistics Office said on Friday, beating forecasts for a 0.3 percent rise by economists polled by Reuters.
The increase was the biggest since February, when prices rose 0.7%, and outpaced June’s 0.2% gain.
In China, consumer price growth has remained weak over the past year, with frequent negative data casting doubt on the strength of domestic demand amid a three-year slowdown in the real estate sector.
Intense competition among Chinese industries, especially in the auto sector, has added downward pressure on prices. Beijing has stepped up its focus on manufacturing this year aVsceker a post-pandemic consumption recovery failed to materialize last year.
Producer prices, a gauge that reflects goods leaving factories as well as the cost of materials and raw materials, fell 0.8% in July, mirroring a decline in the previous month.
Core inflation, which excludes food and energy prices, rose 0.4 percent, the NBS said, from 0.6 percent in June.
Pork prices, a major component of China’s consumer basket, jumped 20 percent in July, the highest since late 2022. Prices have been highly volatile since African swine fever outbreaks from 2018 to 2021 led to mass culling of herds.
Lynn Song, ING’s chief China economist, said firm food prices, which have been mired in deflation for the past year, were a “big part of the increase” in the overall CPI. But she pointed to price slowdowns in other areas, including transportation due to lower vehicle prices, communications due to falling smartphone prices and falling rents.
“We expect price weakness to remain in the top two categories, while we are in wait-and-see mode in the rental category as policy support for the housing market continues to spread,” Song said.
New home prices fell to their lowest level in nearly a decade in May, adding to concerns for the real estate sector. In the same month, authorities introduced measures to encourage state-owned enterprises to buy up unused housing, in a bid to shore up the market.
Last month, Chinese authorities announced unexpected cuts in lending interest rates, following widespread calls for more economic stimulus.
