The National Bureau of Statistics released data on August 9, showing that in July, China's Consumer Price Index (CPI) fell by 0.1% month-on-month and rose by 0.5% year-on-year, influenced by international factors. Excluding the volatile food and energy prices, the core CPI increased by 0.3% month-on-month and 0.9% year-on-year, indicating that the overall CPI remained moderately stable.

Wen Bin, chief economist at China Minsheng Bank, noted that price movements were generally stable in July. The decline in the overall CPI was primarily driven by a temporary pullback in international energy prices, while core CPI remained steady. The prices of summer service consumption and AI-related consumer goods rose, reflecting a structural recovery in domestic demand.

Feng Lin, executive director of the research and development department at Golden Credit Rating, said that in July, prices for electronic products and medical services accelerated, while pork price increases narrowed the year-on-year decline in food prices, providing support to the overall CPI for the month. Feng Lin added that the integrated production capacity control policy for live pigs took effect in July, alongside extreme weather events like high temperatures and heavy rain in some regions, which raised transportation costs. As a result, pork prices rose by 4.1% month-on-month, reversing a 0.8% decline in the previous month, and the year-on-year decline in pork prices narrowed by 2.6 percentage points compared to the previous month.

On a month-on-month basis, the CPI decline in July was 0.2 percentage points narrower than the previous month. Dong Lijuan, chief statistician at the National Bureau of Statistics' Urban Department, explained that the iteration and upgrade of consumer electronics driven by Artificial Intelligence increased demand and prices for related products. Prices of tablet computers, computers, and mobile phones rose by 11.3%, 5.5%, and 1.0% month-on-month, respectively, collectively contributing about 0.03 percentage points to the month-on-month CPI increase. In July, service prices shifted from flat to a 0.4% month-on-month increase, contributing about 0.21 percentage points to the month-on-month CPI rise. Among services, increased summer travel demand drove prices for tour agency fees, hotel accommodation, airfares, and vehicle rental up by 7.2%, 6.5%, 4.2%, and 3.6% month-on-month, respectively, collectively contributing about 0.10 percentage points to the month-on-month CPI increase. Additionally, ongoing policy adjustments in some regions pushed up medical service prices by 1.1% month-on-month, contributing about 0.07 percentage points to the month-on-month CPI increase.

Year-on-year, the CPI increase in July fell by 0.5 percentage points compared to the previous month. Dong Lijuan attributed this mainly to the narrowing year-on-year increase in gasoline prices. Gasoline prices rose by 1.0%, with the increase narrowing by 16.0 percentage points from the previous month, reducing the contribution to the CPI by about 0.45 percentage points and causing energy price growth to slow to 0.6%. Feng Lin commented that although the situation in the Middle East remains volatile, the imported inflationary effects from the sharp rise in international oil prices earlier have weakened. The global AI investment boom has had a limited impact on domestic price levels, which is the main reason for the decline in year-on-year CPI growth in the past two months.

Looking ahead, Feng Lin analyzed that the rise in international oil prices in July is expected to lead to a significant increase in domestic refined oil product prices in early August. Combined with seasonal upward movements in food prices, the month-on-month CPI is likely to turn positive in August, with the year-on-year increase potentially recovering to around 0.7%, remaining at a low level. Overall, the year-on-year CPI increase is likely to stay below 1.0% in the future. This means there is considerable room for consumption-stimulating policies in the second half of the year, and price levels will not be a major constraint for the central bank to cut interest rates. Wen Bin stated that looking ahead to the next phase, as macroeconomic policies take effect and multiple measures expand domestic demand, a better policy environment will be created for reasonable price increases. Additionally, summer, Mid-Autumn, and National Day holidays will drive up service prices, while the gradual bottoming and stabilization of the pig cycle will reduce the drag from food prices, allowing the CPI to gradually rise.