China's CPI rose 2.8 percent year on year in July

Huang Yixuan
China's consumer price index, a main gauge of inflation, rose 2.8 percent year on year in July, up from 2.7 percent in June. 
Huang Yixuan

China's consumer price index, a main gauge of inflation, rose 2.8 percent year on year in July, up from 2.7 percent in June, the National Bureau of Statistics said on Friday.

The headline CPI figure was above market expectations of 2.7 percent, as higher food price inflation more than offset lower non-food price inflation, according to Lu Ting, chief China economist of Nomura.

Food prices soared 9.1 percent year on year, 0.8 percentage points higher than the previous month, leading to a 1.74-percentage-points rise in the overall CPI. 

Non-food prices, meanwhile, grew 1.3 percent, 0.1 percentage point slower than June, contributing 1.04 percentage points to the headline CPI growth.

The rise in food price inflation was mainly driven by higher inflation in pork prices, which surged 27 percent from a year earlier which was 5.9 percentage points faster than June. Fruit prices, which skyrocketed in June by 42.7 percent, cooled slightly in July to post a 39.1 percent rise year on year. These two together boosted the CPI rise by 1.22 percentage points. 

Of the non-food categories, prices in the education, culture and entertainment sector, health care and housing rose by 2.3 percent, 2.6 percent and 1.5 percent, leading to a 0.8-percentage-point increase in the headline CPI.

On a month-on-month basis, the headline CPI edged up by 0.4 percent last month, reversing the 0.1 percent decline in June.

Food prices rebounded by 0.9 percent in general, compared with the 0.3 percent drop in the previous month. 

Among them, vegetable prices posted a 2.6 percent month-on-month rise, as the hot weather and abundant rainfall in some areas had adverse effects on production, storage and transportation, said the bureau's Dong Yaxiu.

The supply of pork was slightly tighter amid the African swine fever, with prices rising 7.8 percent from a month earlier, leading to a 0.2 percent increase in the overall CPI figure. 

Fresh fruit prices, however, fell 6.2 percent as a large number of seasonal fruits were on the market, Dong said.

Among non-food sectors, airfare, travel agency charges and hotel accommodation prices rose by 19.3 percent, 8.6 percent and 2.2 percent, bolstering the CPI growth by about 0.19 percentage points, as travel increased in the summer vacation.

Meanwhile, prices for gasoline and diesel fell by 1.9 percent and 2 percent, affected by factors including the price adjustment of refined oil, together contributing to 0.04 percentage points in the overall CPI decline.

The Producer Price Index, which measures the cost of goods at the factory gate, fell 0.3 percent year on year in July, compared with the flat figure in June, due to "a high base and falling oil price inflation," according to Nomura.

In month-on-month terms, PPI retreated by 0.3 percent, reversing the 0.2 percent rise in May, returning to negative territory after 34 months, partly weighed down by weaker oil price inflation, according to Nomura.

PPI inflation in the oil and natural gas extraction industries dropped 8.3 percent year on year, further extending the decline by 6.5 percentage points from the previous month. PPI inflation also fell in industries of fuel processing and ferrous metal processing.

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