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China Inflation July 2021

China: Consumer price inflation declines to lowest level since April in July: Producer price inflation intensifies

Consumer prices rose 0.30% from the previous month in July, swinging from June’s 0.40% fall, as higher non-food prices more than offset lower food prices. July’s result marked the sharpest increase in prices since February.

Consumer price inflation came in at 1.0% in July, which was down from June’s 1.1%. Consumer price inflation has been dampened in recent months by plummeting pork prices. Annual average inflation ticked down to 0.7% in July (June: 0.9%). Producer price inflation ticked up to 9.0% in July, from June’s 8.8%, amid higher price pressures in the mining and quarrying subsector.

Looking ahead, producer price inflation should stay elevated in H2 notwithstanding government measures, amid resurgent global demand and supply constraints. Regarding consumer prices, panelists see a pickup later this year, although improved pork supply due to farmers rebuilding their hog herds in the wake of African swine fever will keep a lid on the increase.

On producer prices, Ho Woei Chen, economist at United Overseas Bank, commented:

“PPI inflation is likely to stay elevated in H2 21 and we maintain our full-year forecast of 7.5% (2020: -1.8%). High global crude prices as well as supply chain disruptions exacerbated by the domestic Covid-19 resurgence and seasonal demand towards year end will continue to drive PPI in the coming months.”

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