China's inflation cools for third month to 0.5% in July

China's consumer price index (CPI) registered a 0.5% year-on-year increase in July, indicating a continued slowdown in inflation for the third consecutive month. This figure is lower than the 1% rate recorded in June and fell short of analysts' expectations, who had predicted a more moderate decrease, with most forecasts hovering around 0.8%. On a month-on-month basis, the CPI moderated its decline from 0.3% to 0.1%, contrary to expert expectations of a slight rebound to around 0.2%.

According to Dong Lijuan, a statistician at the National Bureau of Statistics (NBS), the fluctuations in international crude oil prices significantly impacted the CPI. Gasoline prices, for instance, decreased by 10.7% between June and July, following earlier increases attributed to the conflict in the Middle East. The NBS also noted a decrease in prices for eggs and fruits, which were "significantly below their seasonal average." Conversely, demand for electronics, driven by the artificial intelligence boom, contributed to rising costs for tablets and computers, while summer travel saw typical increases in airfare and hotel commissions.

The NBS also released data for the producer price index (PPI), which measures industrial prices. The PPI increased by 3.5% year-on-year in July, a decrease of 0.6 percentage points from the previous month. This slowdown follows a period where industrial prices had reached their highest mark since July 2022, largely influenced by rising global energy costs due to the war in Iran. Significant year-on-year increases were seen in the extraction of oil and gas (+3.2%), crude oil processing (+8.2%), and chemical manufacturing (+9.1%), as well as in non-ferrous metals.

Despite these increases, Dong highlighted that price rises in these sectors moderated compared to the previous period. In fact, industrial prices saw a month-on-month decrease of up to 11.8% in the extraction of oil. Overall, industrial prices fell by 0.7% between June and July, marking the second consecutive month of decline after a period of increases from August 2025 to May 2026. The NBS data reflects a complex economic landscape influenced by global events and domestic demand.