China’s consumer prices pick up more than expected in July, up by 0.5%

BEIJING — China’s consumer prices rose by a more-than-expected 0.5% in July from a year ago, boosted by a surge in pork prices, according to data from the National Bureau of Statistics released Friday.

Analysts polled by Reuters had expected a slight pickup in the consumer price index to 0.3% in July from a year ago, versus 0.2% in June.

The 0.5% CPI increase in July was the highest since a 0.7% rise in February, according to official data accessed via Wind Information. China’s biggest holiday of the year, the Lunar New Year, fell in February this year.

Prices of pork, a widely consumed food staple in China, surged by 20.4% year-on-year in July. That was the biggest increase since December 2022, according to Wind.

Pork prices play a significant role in China’s consumer price index, but can be prone to large swings due to disease or other factors affecting production.

Core CPI, which strips out food and energy prices, rose by 0.4% year-on-year in July. That’s down from 0.6% in June.

“Conditions are in place to see inflation trend a little higher in the coming months but it should not impede further monetary easing,” Lynn Song, chief economist, Greater China, ING, said in a note Friday.

“With low inflation and weak credit activity, domestic factors continue to favor further monetary policy easing,” she said. “We continue to look for at least one more rate cut this year with the potential for more if global rate cuts accelerate.”

Song pointed out that the price war in autos, falling smartphone prices and a drop in rents posed near-term drags on non-food prices in China.

Tourism prices rose by a modest 3.1% in July from a year ago, versus the 6.4% year-to-date increase, the statistics bureau data showed.

Education and entertainment prices climbed by 1.7% in July, a touch below the 2% increase for the year so far.

Transportation fuel saw prices rise by 5.1% in July, but those for “transportation tools” fell by 5.6%. It was not immediately clear from the statistics bureau website what the category included.

The latest CPI report also revealed signs of the ongoing real estate slump.

Rental prices fell by 0.3% year-on-year in July, steeper than the 0.1% drop for the year so far, the statistics bureau data showed.

Home appliance prices fell by 1.8% in July, far more than the 0.8% year-to-date decline.

The producer price index for July fell by 0.8% from a year ago. That was slightly less than the 0.9% forecast decline, and unchanged from June’s 0.8% drop.

Prices of building materials and non-metallic materials fell by 5.2% in July, less than the year-to-date 7.1% decline, the data showed. Prices of non-ferrous metals and wires rose by 11.3% year-on-year in July, while that of fuel and power rose by 0.5%.

Last week, the Caixin Manufacturing Purchasing Managers’ Index showed a drop from 51.8 in June to 49.8 in July. That marked a deterioration, albeit mild, for the first time in nine months, according to Caixin. Readings below 50 signal contraction.

“Input cost inflation eased in the latest survey period, which alongside heightened competition led to Chinese manufacturers lowering average selling prices in July,” the Caixin release had said.