The latest data on China’s inflation reveals a shortfall in expectations, primarily due to decreasing food prices. According to analysts at Capital Economics, the drop in prices of fruits and vegetables overshadowed the sharp rise in pork prices, resulting in a decline in overall food inflation. Additionally, energy-price inflation also saw a decrease.
Non-food inflation was dragged down by categories such as vehicles, household appliances, and communications devices. Rents continued to trend downwards, while services inflation slowed from 0.8% in May to 0.7% in June.
Furthermore, China’s producer price index (PPI) showed a slight improvement, reaching a 17-month high after falling consecutively for 21 months. Analysts remain cautious about the future trend of inflation, with slight optimism for a potential increase in the coming months.
Key Points:
Core inflation remained unchanged while factory-gate prices eased slightly. Analysts anticipate a gradual increase in inflation in the second half of the year, with a possibility of monetary-policy easing from the People’s Bank of China.