July data shows the Consumer Price Index (CPI) rose 0.5% year-on-year and fell 0.1% month-on-month, while the Producer Price Index (PPI) increased 3.5% year-on-year and dropped 0.7% month-on-month, according to the National Bureau of Statistics. These figures prompt a closer look at the current state of price movements.

The CPI year-on-year increase of 0.5% was 0.5 percentage points lower than the previous month, marking the first time since February that it has fallen below 1%. Dong Lijuan, chief statistician at the NBS, attributed this slowdown primarily to a narrower rise in gasoline prices. Due to international factors, July gasoline price gains were 16 percentage points less than in June, reducing their upward impact on the CPI by about 0.45 percentage points and dragging overall energy price growth down to 0.6%.

Xu Guangjian, vice president of the China Price Association, noted that despite the gasoline price effect, the CPI still rose 0.5% year-on-year in July. The core CPI, excluding food and energy, increased by 0.9%, indicating that consumer prices remain moderately stable. On a month-on-month basis, the CPI fell 0.1%, a narrower decline of 0.2 percentage points from June. Xu explained that international crude oil price volatility led to a 10.7% drop in domestic gasoline prices, which was 5.8 percentage points larger than the previous month, contributing about 0.35 percentage points to the monthly CPI decline. Additionally, abundant seasonal fruit and vegetable supplies caused fresh fruit prices to fall 3.8%, weighing on the monthly CPI by about 0.07 percentage points.

Compared to June, some domestic market segments showed positive changes in July, with monthly prices rising. Pork prices rebounded by 4.1% from a 0.8% decline in June, driven by the effects of comprehensive pig production capacity regulation policies and higher transportation costs from extreme weather like heatwaves and heavy rains. This contributed about 0.07 percentage points to the monthly CPI increase. Consumer electronics saw strong demand as artificial intelligence spurred product upgrades, with prices for tablets, computers, and mobile phones rising by 11.3%, 5.5%, and 1.0%, respectively, collectively adding about 0.03 percentage points to the monthly CPI. Service prices also increased due to summer travel demand, lifting costs for travel agency fees, hotel accommodation, airfares, and vehicle rentals. Meanwhile, regional policy adjustments pushed medical service prices up by 1.1%, contributing about 0.07 percentage points to the monthly CPI rise.

Liu Fang, a researcher at the Price Research Institute of the National Development and Reform Commission, stated that the gradual effects of pig production capacity regulation, upward support from international grain prices, rising demand from new drivers like AI, and the implementation of consumption-boosting policies will all support a continued moderate recovery in the CPI.

In July, the PPI fell 0.7% month-on-month and rose 3.5% year-on-year, with the annual gain narrowing by 0.6 percentage points from June. This was influenced by both international and seasonal factors. Dong Lijuan attributed the 0.4 percentage point expansion in the monthly PPI decline to two key factors: international input price impacts on oil and non-ferrous metals, and seasonal effects from hot, rainy, and typhoon weather that slowed construction project progress, lowering prices in related industries. Additionally, increased hydropower and wind power generation led to price drops of 10.3% and 3.9%, respectively.

Dong also highlighted that industrial transformation and consumption upgrades are driving demand and price increases in some sectors. New growth drivers, such as intelligent unmanned aerial vehicle manufacturing, carbon new materials, and shipbuilding, saw monthly price rises of 2.5%, 0.4%, and 0.3%, respectively. Quality-focused consumption grew rapidly, with prices for smart home devices and skincare cosmetics rising by 3.4% and 0.7% month-on-month.

Liu Fang concluded that given China's economic resilience and ample supply of livelihood goods, combined with the full utilization of existing and incremental policies and increased counter-cyclical adjustments, domestic demand potential is expected to be further released. Price trends in the second half of the year are likely to continue with a moderate CPI rise and a stabilizing PPI trend.