Consumer inflation flat in China, factory-gate prices fall

China’s consumer inflation was flat in July while factory-gate prices fell for a 34th consecutive month, highlighting persistent weakness in domestic demand despite government efforts to curb price wars and stabilise the economy.

Data from the National Bureau of Statistics showed the consumer price index (CPI) was unchanged year-on-year, compared with a 0.1% rise in June and defying forecasts of a slight decline.

On a monthly basis, CPI rose 0.4%, reversing June’s 0.1% drop.

Core CPI, which excludes food and energy, rose 0.8% from a year earlier, the fastest pace in 17 months, helped by smaller declines in car and phone prices.

Food prices fell 1.6% from a year earlier, with tobacco, liquor, transportation and communication also weighing on the headline figure.

The producer price index (PPI) dropped 3.6% from a year earlier, matching June’s fall and exceeding expectations for a smaller decline. The decline - driven by weak demand, overcapacity and intense competition - has persisted for nearly three years.

On a monthly basis, PPI eased 0.2%, an improvement from June’s 0.4% drop.

Authorities had pledged to tackle “disorderly competition” in sectors such as autos and high-tech manufacturing as part of a broader campaign to address excess industrial capacity.

However, analysts say these measures may have limited effect without stronger demand-side stimulus, pointing to continued headwinds from a prolonged housing slump, high youth unemployment and fragile consumer sentiment.

While resilient export growth has provided some support - July shipments rose 7.2% from a year earlier - manufacturing surveys pointed to renewed weakness.

Both official and private-sector PMIs slipped further into contraction in July, with new export orders falling for a fourth straight month.

Reporting by Josh White for Sharecast.com.