China: Inflation hits over two-year high in July
Consumer prices increased 0.50% in July over the previous month, following June’s flat result. July’s figure marked the highest reading since February. The figure was largely due to rising prices for food.
Consumer inflation came in at 2.7% in July, which was up from June’s 2.5%. July’s reading marked the highest inflation rate since April 2020, but was still very low compared to other Asian economies—a sign of subdued domestic demand. Annual average inflation rose to 1.6% in July (June: 1.5%). Finally, producer price inflation fell to 4.2% in July, from the previous month’s 6.1%.
Consumer price inflation is expected to stay muted for the remainder of the year. Meanwhile, producer price inflation should continue to trend down on a base effect—given increasingly high producer price inflation readings as last year progressed—and the recent fall in global commodity prices. The recent severe heatwave is an upside risk due to the potential impact on food prices.