Analyst
Analyst
July CPI And PPI Inflation Below Expectations
China's July headline CPI inflation eased to 0.5% yoy (-0.5ppt mom), below Bloomberg's consensus estimate of 0.8% yoy. Core CPI inflation edged down to 0.9% yoy (-0.1ppt mom), below Bloomberg's consensus estimate of 1.0% yoy, with goods inflation moderating to 0.2% yoy (-0.9ppt mom) and services inflation softening to 0.7% yoy (-0.1ppt mom).
PPI inflation slowed to 3.5% yoy (-0.6ppt mom), below Bloomberg's consensus estimate of 3.9% yoy, as producer goods PPI inflation eased to 4.8% yoy (-0.7ppt mom) on softer raw materials inflation (6.1% yoy, -2.5ppt mom), while consumer goods PPI deflation eased to -0.8% yoy (+0.1ppt mom).
Overall, the data is mildly negative for markets, as softer data may raise concerns that China may soon return to a deflationary environment.
Our View
July headline CPI inflation eased to 0.5% yoy (-0.5ppt mom), below Bloomberg's consensus estimate of 0.8% yoy. The softness was concentrated in transportation and communication inflation, which moderated to 0.4% yoy (-3.7ppt mom) as the fuel cost pass-through that supported the category through 2Q26 faded. Food deflation narrowed slightly to -1.5% yoy (+0.1ppt mom), while food, tobacco and liquor inflation held at 0.8% yoy (0.0ppt mom). For other categories, daily necessities and services inflation moderated to 0.8% yoy (-0.5ppt mom) and other products and services inflation slowed to 5.8% yoy (-0.8ppt mom). On the other hand, medical-related articles inflation picked up to 2.9% yoy (+0.6ppt mom). Core CPI inflation edged down to 0.9% yoy (-0.1ppt mom), below Bloomberg consensus of 1.0% yoy, with goods inflation moderating to 0.2% yoy (-0.9ppt mom) and services inflation softening to 0.7% yoy (-0.1ppt mom).
PPI inflation slowed to 3.5% yoy in July (-0.6ppt mom), below Bloomberg's consensus estimate of 3.9% yoy. Producer goods PPI inflation eased to 4.8% yoy (-0.7ppt mom), mainly dragged by raw materials inflation slowing to 6.1% yoy (-2.5ppt mom). Consumer goods PPI deflation eased to-0.8% yoy (+0.1ppt mom), with durable consumer goods PPI inflation improving to 0.4% yoy (+0.3ppt mom). Moreover, Purchasing Price Index inflation retreated to 5.5% yoy (-0.9ppt mom), reflecting softer fuel and power inflation (9.3% yoy, -2.5ppt mom), non-ferrous metal materials and wires inflation (19.0% yoy, -2.6ppt mom) and chemical raw materials inflation (9.3% yoy, -2.2ppt mom).
Overall, the July data suggests the upstream-led reflation is passing its peak rather than broadening into end-demand, with the softness at both ends of the price chain traceable to the same fading energy inflation. Looking ahead, investors should watch whether upstream inflation continues to decelerate due to a higher base for comparison from 2H26.
July CPI And PPI Inflation Below Expectations
China's July headline CPI inflation eased to 0.5% yoy (-0.5ppt mom), below Bloomberg's consensus estimate of 0.8% yoy. Core CPI inflation edged down to 0.9% yoy (-0.1ppt mom), below Bloomberg's consensus estimate of 1.0% yoy, with goods inflation moderating to 0.2% yoy (-0.9ppt mom) and services inflation softening to 0.7% yoy (-0.1ppt mom).
PPI inflation slowed to 3.5% yoy (-0.6ppt mom), below Bloomberg's consensus estimate of 3.9% yoy, as producer goods PPI inflation eased to 4.8% yoy (-0.7ppt mom) on softer raw materials inflation (6.1% yoy, -2.5ppt mom), while consumer goods PPI deflation eased to -0.8% yoy (+0.1ppt mom).
Overall, the data is mildly negative for markets, as softer data may raise concerns that China may soon return to a deflationary environment.
Our View
July headline CPI inflation eased to 0.5% yoy (-0.5ppt mom), below Bloomberg's consensus estimate of 0.8% yoy. The softness was concentrated in transportation and communication inflation, which moderated to 0.4% yoy (-3.7ppt mom) as the fuel cost pass-through that supported the category through 2Q26 faded. Food deflation narrowed slightly to -1.5% yoy (+0.1ppt mom), while food, tobacco and liquor inflation held at 0.8% yoy (0.0ppt mom). For other categories, daily necessities and services inflation moderated to 0.8% yoy (-0.5ppt mom) and other products and services inflation slowed to 5.8% yoy (-0.8ppt mom). On the other hand, medical-related articles inflation picked up to 2.9% yoy (+0.6ppt mom). Core CPI inflation edged down to 0.9% yoy (-0.1ppt mom), below Bloomberg consensus of 1.0% yoy, with goods inflation moderating to 0.2% yoy (-0.9ppt mom) and services inflation softening to 0.7% yoy (-0.1ppt mom).
PPI inflation slowed to 3.5% yoy in July (-0.6ppt mom), below Bloomberg's consensus estimate of 3.9% yoy. Producer goods PPI inflation eased to 4.8% yoy (-0.7ppt mom), mainly dragged by raw materials inflation slowing to 6.1% yoy (-2.5ppt mom). Consumer goods PPI deflation eased to-0.8% yoy (+0.1ppt mom), with durable consumer goods PPI inflation improving to 0.4% yoy (+0.3ppt mom). Moreover, Purchasing Price Index inflation retreated to 5.5% yoy (-0.9ppt mom), reflecting softer fuel and power inflation (9.3% yoy, -2.5ppt mom), non-ferrous metal materials and wires inflation (19.0% yoy, -2.6ppt mom) and chemical raw materials inflation (9.3% yoy, -2.2ppt mom).
Overall, the July data suggests the upstream-led reflation is passing its peak rather than broadening into end-demand, with the softness at both ends of the price chain traceable to the same fading energy inflation. Looking ahead, investors should watch whether upstream inflation continues to decelerate due to a higher base for comparison from 2H26.
Analyst
Analyst
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