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China Inflation July 2023

China: Consumer prices record greatest decline since January 2021 in July

Consumer prices decreased 0.3% year-on-year in July, contrasting June’s flat reading. July’s figure marked the largest fall in consumer prices since January 2021. That said, consumer prices increased 0.20% over the previous month in July, contrasting the 0.20% fall logged in June.

Meanwhile, producer prices fell 4.4% on an annual basis in July, which was a more modest fall compared to June’s 5.4% decrease but still marked the tenth consecutive monthly fall.

Weak price pressures are symptomatic of soft domestic demand, normalized supply chains, ongoing property-sector turmoil and depressed economic sentiment. Consumer and producer price pressures should pick up slightly ahead, on the recent uptick in global energy prices and extreme weather at home pushing up food prices. However, the weak economy will ensure inflation remains depressed, and panelists are likely to revise down their forecasts for the remainder of 2023 going forward in light of deflation so far in Q3 and weaker-than-expected real-sector data for July.

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