Is China’s reflation trend running out of steam?
CPI inflation cooled more than expected China’s CPI inflation fell to 0.5% year-on-year, down from 1.0% in June, coming in lower than expectations (market: 0.8%, ING: 0.9%) and reaching a 6-month low. In month-on-month terms, CPI edged up slightly to -0.1% from -0.3%, marking the third straight month of negative territory. Core CPI fell to ...
China's reflation trend may be losing momentum, as the country's consumer price index (CPI) slowed more than anticipated in July. The headline CPI fell to 0.5% year-on-year, well below expectations of 0.8% and lower than the 0.9% forecast by ING. In month-on-month terms, CPI edged up slightly to -0.1% from -0.3%, marking the third consecutive month of negative growth.
Core CPI, which excludes volatile food and energy prices, also fell to 0.9% year-on-year, reaching a 6-month low. Transportation fuels, which saw a significant decline in July, and food prices, which have been deflationary for four consecutive months, are the main drags on inflation. While energy prices are volatile, food and rent prices remain stickier, accounting for about half of the CPI basket.
Despite these challenges, there are signs of stabilisation in housing prices and potential El Nino impacts on food prices. The People's Bank of China (PBOC) may need to consider a 10 basis point rate cut to support domestic demand, as inflation remains below pre-pandemic levels.
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