July data shows the Consumer Price Index (CPI) rose 0.5% year-on-year but 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. The CPI year-on-year gain slowed by 0.5 percentage points from June, marking the first time since February that it fell below 1%. Dong Lijuan, a senior statistician at the bureau, attributed this deceleration primarily to a narrower rise in gasoline prices, which were affected by international factors. Gasoline price gains in July were 16 percentage points lower than the previous month, reducing their contribution to the CPI by about 0.45 percentage points and pulling the energy price increase down to 0.6%.

Xu Guangjian, vice president of the China Price Association, noted that despite the impact of slower gasoline price growth, the CPI still rose 0.5% year-on-year in July. The core CPI, which excludes food and energy, increased 0.9% year-on-year, indicating that consumer prices are maintaining a moderate upward trend. On a month-on-month basis, the CPI fell 0.1%, a narrower decline than June's 0.3% drop. Xu explained that volatility in international crude oil prices led to a 10.7% month-on-month decrease in domestic gasoline prices, with the decline expanding by 5.8 percentage points from June, dragging the CPI down by about 0.35 percentage points. Additionally, a seasonal influx of fruits and vegetables boosted market supply, causing fresh fruit prices to fall 3.8% and contributing a 0.07 percentage point negative impact on the monthly CPI.

Compared to June, some domestic industry sectors showed positive price changes in July, with several categories posting month-on-month increases. Pork prices rebounded, rising 4.1% month-on-month after a 0.8% decline in June, driven by the effects of comprehensive production capacity regulation policies and higher transportation costs due to extreme weather like heatwaves and heavy rains in some regions. This contributed about 0.07 percentage points to the monthly CPI increase. Consumer electronics saw strong demand, with artificial intelligence (AI) boosting product upgrades, leading to price increases for tablets (11.3%), computers (5.5%), and mobile phones (1.0%), collectively adding 0.03 percentage points to the monthly CPI. Service prices also rose, driven by summer travel demand, which lifted prices for travel agency fees, hotel accommodation, airfares, and car rentals. Additionally, ongoing policy-driven price adjustments in some regions pushed medical service prices up 1.1%, contributing 0.07 percentage points to the monthly CPI increase.

Liu Fang, a researcher at the National Development and Reform Commission's Market and Price Research Institute, stated that the gradual effectiveness of pork production capacity regulation, upward support for international grain prices, growing demand from new drivers like AI, and the implementation of consumption-boosting policies should 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 slowing by 0.6 percentage points from June. Dong Lijuan noted that the month-on-month decline in the PPI expanded by 0.4 percentage points from the previous month. This was due to international factors lowering prices in oil and non-ferrous metal-related industries, and seasonal factors like hot weather, rain, and typhoons in July, which slowed construction project progress and caused price drops in some sectors. Meanwhile, increased hydropower and wind power generation led to price decreases of 10.3% and 3.9%, respectively.

"However, industrial transformation and consumption upgrades are driving demand and price increases in some sectors," Dong added. "New growth drivers are strengthening, with month-on-month price increases of 2.5% for intelligent unmanned aerial vehicle manufacturing, 0.4% for carbon new materials, and 0.3% for ship and related equipment manufacturing. Quality consumption is growing rapidly, with prices for smart home consumer devices and skincare cosmetics manufacturing rising 3.4% and 0.7% month-on-month, respectively." Liu Fang concluded that China's economy is resilient, with ample supply of daily necessities. By leveraging the effects of existing and incremental policies and increasing counter-cyclical adjustments, domestic demand potential is expected to be further unleashed. He anticipates that price trends in the second half of the year will continue to show a moderate CPI increase and a stabilizing PPI growth trend.