China's Consumer Prices Accelerate in July, Deflation Persists

China's consumer prices rose by 0.5% in July compared to the previous year, surpassing analysts' expectations of a 0.3% increase, according to the National Bureau of Statistics (NBS). This rise marks the highest increase since February and is attributed to a recovery in domestic demand and adverse weather conditions, such as high temperatures and rainfall. Core inflation, which excludes volatile food and fuel prices, also increased by 0.4% from June.

Despite the rise in consumer prices, the producer price index (PPI) fell by 0.8% in July, continuing its deflationary trend and aligning closely with forecasts. The decline in factory-gate prices underscores ongoing economic challenges, including weak domestic demand and external trade pressures. To address these issues, Chinese authorities have pledged to boost consumer spending, including the allocation of 300 billion yuan ($41.96 billion) in ultra-long treasury bonds aimed at stimulating the economy.

Retail sales showed a modest growth of 2% in June from a year earlier, indicating some improvement in consumer activity. However, broader economic concerns remain, including trade tensions with the West, tariffs on Chinese goods, and fears of a U.S. recession, which continue to impact China's economic outlook.