The consumer price index fell 0.3% in July, its first contraction in more than two years

The Consumer Price Index (CPI), the main indicator of inflation in China, entered negative territory with a decline of 0.3% year-on-year in July, according to data provided on Wednesday by the National Bureau of Statistics (ONE).

July rate is 0.3 points lower than the previous month, and represents The first contraction in the consumer price index since February 2021.

However, the data was somewhat higher than what analysts expected, among which the most prevalent forecast is a 0.4% drop from last year’s prices.

A statistician Dong Liguan emphasized that the decline in CPI is temporary: “With the recovery of the Chinese economy, the continuous expansion of market demand, the continuous improvement of the relationship between supply and demand and the gradual elimination of traces of the past, the CPI is expected to gradually rise.”

Indeed, the monthly comparison of consumer prices, which had been negative for five consecutive months, rose in July to 0.2%, which surprised analysts, who had expected a further decline, this time by 0.1%.

Julian Evans-Pritchard of UK advisory firm Capital Economics explains that the year-on-year decline in July was due to Reduction in food swelling Given the high comparison base due to the significant rise in pork prices a year ago.

The expert notes that core inflation – an indicator that strips away fluctuations in food or energy prices – rose to 0.8% year-on-year, its highest level since January, and that service prices reached their highest in the last 17 months by rising 1.2%.

“We question whether China will enter a prolonged period of deflation.Evans-Pritchard said.

lower industrial prices

ONE also published today its Producer Price Index (IPP), which measures industrial prices, which posted a year-over-year decline of 4.4% in July, one point less pronounced than that recorded in the previous month, although this relative rebound fell short of expectations. , where experts predicted it would be around -4.1%.

Capital Economics attributes the PPI development to raw material price volatility, this time due to the rising cost of crude oil and gas.