China’s CPI flat in July, core inflation rises as domestic demand gathers pace

China’s consumer price index (CPI), a key gauge of inflation, was unchanged year-on-year in July, but core CPI rose 0.8 percent year-on-year, reflecting the effects of consumption-boosting policies, according to data released by the National Bureau of Statistics (NBS) on Saturday.

NBS chief statistician Dong Lijuan attributed the CPI remained flat year-on-year, mainly due to relatively low food prices. Due to a high base in the same period last year, food prices decreased by 1.6 percent year-on-year in July, with the rate of decline widening by 1.3 percentage points compared to the previous month, dragging down the CPI by about 0.29 percentage points.

On a monthly basis, the CPI rose by 0.4 percent in July, reversing from a 0.1 percent decline in the previous month. The increase was mainly driven by higher service and industrial consumer goods prices, Dong said.

This shows that policies to expand domestic demand are continuing to take effect, with positive changes seen in the consumer sector, according to Dong.

For example, service prices rose 0.6 percent month-on-month, contributing approximately 0.26 percentage points to the CPI increase, accounting for over 60 percent of the total CPI growth. Driven by the peak summer travel season, prices of air tickets, tourism, hotel accommodation, and vehicle rentals rose by 17.9 percent, 9.1 percent, 6.9 percent, and 4.4 percent, all higher than seasonal averages, jointly pushing up the CPI by around 0.21 percentage points.

Core CPI, excluding food and energy prices, continued its upward trend, rising by 0.8 percent year-on-year, up 0.1 percentage points from June and the highest since March 2024, Dong noted.

Gold and platinum jewelry prices surged by 37.1 percent and 27.3 percent year – on – year, jointly contributing about 0.22 percentage points to CPI growth. Service prices kept rising 0.5 percent year-on-year, contributing about 0.19 percentage points.

Although the consumption market has not fully recovered, there are signs of partial recovery, Wang Peng, associate research fellow at the Beijing Academy of Social Sciences, told the Global Times on Saturday.

“The sustained year-on-year rise of core CPI is a significant positive signal. Excluding fluctuations in food and energy prices, it shows that domestic demand, especially in key areas such as service consumption, is gaining momentum, and the economy’s internal driving force is steadily building,” Wang noted.

The NBS data also showed the country’s producer price index (PPI), which measures factory-gate prices, decreased by 0.2 percent month-on-month in July, with the pace of decline narrowing by 0.2 percentage points from June—the first such narrowing since March.

Dong explained that the contraction in month-on-month PPI decline was partly due to seasonal factors and uncertainties in the global trade environment, and continued improvements in domestic market competition.

Year-on-year, the PPI fell 3.6 percent, the same as in June.

Dong highlighted price gains in some industries as supply and demand dynamics improved. Aircraft manufacturing prices rose by 3.0 percent; wearable smart device manufacturing prices increased by 1.6 percent; microwave communication equipment prices went up by 0.9 percent, and server prices increased by 0.6 percent.

Downward pressure on industrial prices has eased. Policies to stabilize growth have shown initial results, and the production and operation environment for enterprises is improving, Wang said, adding that further targeted policies are needed to stimulate market vitality and consolidate the economy’s positive momentum.

Global Times