In July, the Consumer Price Index (CPI) rose by 0.5% year-on-year but fell by 0.1% month-on-month, while the Producer Price Index (PPI) increased by 3.5% year-on-year and dropped by 0.7% month-on-month. The National Bureau of Statistics released the latest price data on the 9th, prompting a discussion on how to interpret the current trend in price movements.
Data shows that the CPI's year-on-year increase in July was 0.5 percentage points lower than the previous month, marking the first time it has fallen below 1% since February of this year. Dong Lijuan, chief statistician at the NBS's Urban Department, attributed the slowing CPI growth primarily to a narrower rise in gasoline prices. She noted that due to international input factors, the increase in gasoline prices in July was 16 percentage points lower than the previous month, reducing their upward impact on the CPI by about 0.45 percentage points and causing energy prices to moderate to a 0.6% rise.
Xu Guangjian, vice president of the China Price Association, stated that despite the dampening effect of slower gasoline price growth, the CPI still rose 0.5% year-on-year in July. The core CPI, which excludes food and energy prices, increased by 0.9% year-on-year, indicating that consumer prices overall maintained a moderate upward trend. On a monthly basis, the CPI declined by 0.1%, a narrowing of 0.2 percentage points from the previous month. Xu explained that fluctuations in international crude oil prices in July led to a 10.7% drop in domestic gasoline prices, with the decline expanding by 5.8 percentage points from the previous month, affecting the CPI's monthly drop by about 0.35 percentage points. Additionally, the ample supply of seasonal fruits and vegetables, due to market availability, caused fruit prices to fall by 3.8%, impacting the CPI's monthly decline by about 0.07 percentage points.
Compared to the previous month, some domestic industry sectors showed positive market price changes in July, with monthly prices rising. Pork prices rebounded: the effects of comprehensive regulatory policies on pig production capacity, combined with increased transportation costs from extreme weather events like high temperatures and heavy rains in some regions, turned pork prices from a 0.8% decline in the previous month to a 4.1% increase, contributing about 0.07 percentage points to the CPI's monthly rise. Consumer electronics demand was strong, with artificial intelligence driving product upgrades and increased demand, leading to price increases for tablets, computers, and mobile phones by 11.3%, 5.5%, and 1.0% respectively, collectively impacting the CPI's monthly rise by about 0.03 percentage points. Service prices also rose, driven by increased summer travel demand, with prices for travel agency fees, hotel accommodation, airfares, and vehicle rental services all increasing. Additionally, regional policy adjustments continued, with medical service prices rising 1.1%, contributing about 0.07 percentage points to the CPI's monthly rise.
"The effects of regulating pig production capacity are gradually becoming apparent, and there is upward support for international grain prices. At the same time, the release of demand from new growth drivers like artificial intelligence, along with the ongoing implementation of consumption-promoting policies, will provide support for the CPI's continued moderate recovery," said Liu Fang, a researcher at the National Development and Reform Commission's Market and Price Research Institute.
In July, influenced by input and seasonal factors, the PPI fell by 0.7% month-on-month and rose by 3.5% year-on-year, with the annual increase slowing by 0.6 percentage points from the previous month. Dong Lijuan noted that the PPI's monthly decline expanded by 0.4 percentage points from the previous month. This was due to two factors: first, international input factors affected prices of oil, non-ferrous metals, and related industries, leading to downward pressure; second, seasonal factors played a role, as the high temperatures, rains, and typhoons in July slowed construction project progress, causing price declines in some sectors, while increased hydropower and wind power generation led to respective price drops of 10.3% and 3.9%.
"At the same time, we should note that industrial transformation and upgrades, along with the expansion of consumption quality, are driving increased demand and price rises in some sectors. New growth drivers are strengthening, with prices for smart unmanned aerial vehicle manufacturing, carbon-based new materials, and ship and related equipment manufacturing rising by 2.5%, 0.4%, and 0.3% month-on-month respectively. Quality-oriented consumption is growing rapidly, with prices for smart home appliances and skincare cosmetics manufacturing increasing by 3.4% and 0.7% month-on-month respectively," Dong added.
Liu Fang concluded that China's economy has strong resilience, and the supply of livelihood goods is ample. With the effective implementation of existing and incremental policies, along with greater counter-cyclical adjustments, domestic demand potential is expected to be further released. It is forecasted that price movements in the second half of the year will continue the positive trend of moderate CPI growth and a stabilization of the PPI's upward trend.