China’s inflation fell to 1.8% yoy in July 20129 August, 2012, 9:51. Posted by Zarathustra
Inflation in China continues to slow in July. Latest figures from the National Bureau of Statistics show that CPI increased by 1.8% in July compared with a year ago, down from 2.2% in June, but slightly above consensus estimate of 1.7%. The year-on-year inflation rate is at the lowest since January 2010.
On a month-on-month basis, CPI increased by 0.1%, up from –0.6% in June, reversing the deflationary trend over the previous few months.
Looking into individual components, food prices increased by 2.4% on a year-on-year basis, down from 3.8% as meat and eggs prices fell more sharply in July than in June. Meanwhile, non-food prices have increased by 1.5% on a year-on-year basis. On a month on month basis, food prices decreased by 0.1%, while non-food prices increased by 0.2%.
On a related note, producer price index (PPI) continues to slide. On a year-on-year basis, PPI fell by 2.9%, below forecast of –2.8%. On a month-on-month basis, PPI fell by 0.8%.
Source: National Bureau of Statistics
Although slightly higher than expected, and although the month-on-month prices change turned positive, the latest CPI (as well as PPI) confirm that there is no inflationary pressure to speak of whatsoever. At the moment, we expect that the recent increase of global agricultural prices to be a small upside risk to China’s CPI in the short-term, while we continue to expect deflationary pressure to be present over the medium term due to the slack in the economy.