The National Bureau of Statistics of China released the CPI and PPI data on August 9. The Consumer Price Index (CPI) for July increased by 0.5% year-on-year, higher than the 0.2% growth in the previous month and above the market expectation of 0.3%. This marks the six consecutive months of positive growth. The increase was primarily driven by rising food prices due to weather conditions, which accounted for approximately 50% of the CPI’s annual growth in July. Excluding the relatively volatile food and energy prices, the core CPI rose by only 0.4% year-on-year, down from 0.6% in the previous month.

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On the other hand, the Producer Price Index (PPI) for July decreased by 0.8% year-on-year, matching the decline of the previous month and performing better than the market expectation of -0.9%. However, this marks the 22nd consecutive month of contraction. According to Dong Li-juan, a statistician at the National Bureau of Statistics, the decline was mainly due to weak market demand and falling international commodity prices.

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Overall, the domestic demand in China remains weak. Although the Chinese government committed to revitalizing domestic demand during the 3rd Plenary Session and the Politburo meeting in July, so far, the government has only lowered the Loan Prime Rate (LPR) and has not introduced detailed or large-scale fiscal stimulus measures. This presents a significant challenge to achieving the annual GDP growth target of 5% through increased domestic demand.