Data released on August 9th reveals that the national Consumer Price Index (CPI) edged down 0.1% month-over-month in July, while rising 0.5% year-over-year, according to the National Bureau of Statistics. The core CPI, which excludes food and energy prices, increased by 0.3% from the previous month and 0.9% from a year ago, indicating that overall consumer inflation remained moderate. On the producer side, the Producer Price Index (PPI) fell 0.7% month-over-month but rose 3.5% year-over-year. This marks a 0.6 percentage point deceleration in the annual gain compared to the previous month, influenced by input cost pressures and seasonal factors, even as demand in some domestic industries strengthened.

Consumer Price Index: Month-over-Month Decline Narrows, Year-over-Year Rise Remains Mild

On a month-over-month basis, the national CPI contracted by 0.1%, a narrowing of 0.2 percentage points from the prior month. International market price volatility dragged domestic gasoline prices down by 10.7%, a steeper decline than the previous month's 4.9% drop, which alone contributed roughly 0.35 percentage points to the CPI's monthly decrease. Food prices were flat month-over-month, underperforming the seasonal average by 0.6 percentage points. Within this category, fresh vegetable prices rose 1.3%, while egg prices fell 2.1%, both significantly below typical seasonal patterns. An ample supply of seasonal fruits led to a 3.8% decline in fresh fruit prices, subtracting about 0.07 percentage points from the monthly CPI. Conversely, pork prices flipped from a 0.8% drop in June to a 4.1% increase in July, driven by the effects of comprehensive production capacity regulation policies and higher transportation costs from extreme weather like heatwaves and heavy rains. This contributed roughly 0.07 percentage points to the CPI's monthly rise. Demand for consumer electronics, spurred by AI-driven product upgrades, pushed prices higher for tablets (up 11.3%), computers (up 5.5%), and mobile phones (up 1.0%), collectively adding about 0.03 percentage points to the monthly CPI. Service prices turned from stable to a 0.4% monthly increase, contributing 0.21 percentage points. This was largely due to summer travel demand, with prices for tour agency fees, hotel accommodation, airfares, and car rentals rising 7.2%, 6.5%, 4.2%, and 3.6% respectively, contributing 0.10 percentage points. Additionally, ongoing policy-driven price adjustments in some regions pushed medical service costs up by 1.1%, adding 0.07 percentage points to the monthly CPI change.

Year-over-year, the national CPI rose 0.5%, maintaining a moderate pace. This annual increase was 0.5 percentage points lower than in June, mainly due to a significant slowdown in gasoline price growth. Gasoline prices were up just 1.0% year-over-year, a 16.0 percentage point deceleration from the previous month, reducing its contribution to the CPI by about 0.45 percentage points and pulling the overall energy price increase to 0.6%. Excluding energy, industrial consumer goods prices rose 1.5% year-over-year, a 0.2 percentage point retreat from June, contributing 0.37 percentage points to the CPI. Within this group, price gains for gold jewelry (up 24.6%), personal care products (up 1.7%), and household appliances (up 0.2%) moderated, adding 0.13 percentage points combined. Meanwhile, price increases for computers (up 17.4%), tablets (up 17.2%), and mobile phones (up 8.5%) accelerated, contributing 0.14 percentage points. Service prices increased 0.7% year-over-year, a 0.1 percentage point slowdown from June, contributing 0.36 percentage points. Medical service prices rose 4.3%, accelerating from 3.4% in June and contributing 0.28 percentage points. Prices for household services, dining out, and education services rose 1.3%, 1.0%, and 0.6% respectively, remaining broadly stable. Food prices fell 1.5% year-over-year, a slight narrowing of the 0.1 percentage point decline from June, dragging the CPI down by 0.25 percentage points. Pork prices dropped 13.3%, a narrowing of the 2.6 percentage point decline, subtracting 0.25 percentage points. Prices for fresh vegetables, fresh fruits, grains, cooking oils, and dairy fell between 0.3% and 1.5%. Egg prices surged 17.8%, though this was a 2.2 percentage point deceleration from June. Prices for lamb, beef, and poultry rose between 1.6% and 6.2%.

Producer Price Index: Month-over-Month Decline, Annual Gain Slows

On a month-over-month basis, the national PPI fell 0.7%, a 0.4 percentage point widening of the decline from June. Key characteristics of the monthly PPI movement included: First, imported cost pressures drove down prices in related domestic industries. Extraction of petroleum and natural gas, manufacturing of refined petroleum products, and manufacturing of organic chemical materials fell by 11.8%, 8.4%, and 4.2%, respectively. Prices for mining of non-ferrous metal ores and smelting and pressing of non-ferrous metals dropped by 2.1% and 1.7%, with these five industries collectively contributing about 0.65 percentage points to the monthly PPI decline. Second, seasonal factors impacted prices in certain sectors. Frequent hot, rainy, and typhoon weather in July slowed construction activity, leading to a 0.8% decline in smelting and pressing of ferrous metals and a 0.5% drop in manufacturing of non-metallic mineral products. Increased hydropower and wind power generation pushed their prices down by 10.3% and 3.9%, with these four industries contributing about 0.11 percentage points to the monthly decline. Third, industrial transformation, upgrading, and expanding consumer demand boosted prices in some sectors. Growth in new drivers like AI, high-end equipment, and new materials lifted prices for manufacturing of intelligent unmanned aerial vehicles (up 2.5%), carbon new materials (up 0.4%), and shipbuilding and related equipment (up 0.3%). Rising quality consumption led to price increases for smart home consumer devices (up 3.4%) and skincare cosmetics manufacturing (up 0.7%).

Year-over-year, the national PPI rose 3.5%, a 0.6 percentage point slowdown from June. Among the major industries with price increases, gains moderated for extraction of petroleum and natural gas (up 3.2%), processing of petroleum, coal and other fuels (up 8.2%), and manufacturing of chemical raw materials and products (up 9.1%). Mining of non-ferrous metal ores (up 22.6%) and smelting and pressing of non-ferrous metals (up 20.2%), along with smelting and pressing of ferrous metals (up 2.7%), also saw slower annual gains. These six industries collectively contributed 2.55 percentage points to the PPI's annual increase. Conversely, price gains accelerated for mining and washing of coal (up 27.1%), manufacturing of electrical machinery and equipment (up 5.7%), and manufacturing of computers, communication, and other electronic equipment (up 4.4%), contributing 1.53 percentage points combined. The upward pull from these nine industries was 0.56 percentage points less than in the previous month. The five industries exerting the largest downward drag on the PPI were: production and supply of electric power and heat, manufacturing of automobiles, manufacturing of non-metallic mineral products, manufacturing of pharmaceuticals, and manufacturing of beverages, liquor, and refined tea. Their price declines ranged from 2.3% to 5.7%, collectively subtracting about 0.76 percentage points from the year-over-year PPI, a 0.05 percentage point reduction in their drag from the previous month.