Chinese Consumer Price Index Growth Surpasses Expectations

Chinese consumer price index (CPI) inflation increased more than anticipated in July, following recent interest rate cuts by the People’s Bank of China (PBOC).

CPI rose by 0.5% year-on-year, as reported by the National Bureau of Statistics on Friday. This figure slightly exceeded expectations of a 0.3% increase and was up from 0.2% in the previous month.

This uptick in inflation follows Beijing’s initiatives to enhance local liquidity conditions, primarily through interest rate reductions by the PBOC. Additionally, in July, the Chinese government committed to implementing more supportive measures to stimulate the economy, particularly to boost consumer demand.

Despite the positive July inflation figures, overall consumer inflation remains subdued, influenced by high unemployment, an ongoing property market slowdown, and weak consumer sentiment.

Meanwhile, the producer price index (PPI) inflation has contracted for the 22nd consecutive month, albeit at its slowest pace since January 2023, with a year-on-year decrease of 0.8%, which was marginally better than expectations of a 0.9% decline. This matched the 0.8% decline recorded in June.

Recent purchasing managers index data indicates that China’s manufacturing sector continues to slide deeper into contraction territory, posing challenges for the country’s vital economic engine that has been grappling with weak demand for nearly four years.