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Andrew Mullen

Factory-gate price inflation in China remained high in July, data released on Monday showed.
The producer price index (PPI), which reflects the prices that factories charge wholesalers for their products, rose by 9 per cent in July from a year earlier, from a gain of 8.8 per cent in June the National Bureau of Statistics (NBS) said.
This was above expectations, as a Bloomberg survey of analysts had predicted a rise of 8.6 per cent.




“The price increase of industrial products expanded slightly in July as prices of crude oil, coal and related products rose sharply,” said senior NBS economist Dong Lijuan.
China’s official consumer price index (CPI), meanwhile, rose by 1 per cent in July from a year earlier, down from 1.1 per cent in June, the NBS said.
This was above the Bloomberg survey median, which had predicted a 0.8 per cent rise.




Beijing has set a 2021 CPI growth target of around 3 per cent, compared with around 3.5 per cent last year.
China’s core consumer inflation rate, excluding volatile food and energy prices, rose 1.3 per cent in July compared with a year earlier, up from 0.9 per cent in June.
Food prices fell by 3.7 per cent from a year earlier in July, from a rise of 1.7 per cent in June.
China's year-on-year inflation growth for 2021



Month
Consumer price index (CPI)
Producer price index (PPI)




January 
-0.3%
0.3%


February 
-0.2%
1.7%


March
0.4%
4.4%


April
0.9%
6.8%


May
1.3%
9.0%


June
1.1%
8.8%


July
1.0%
9.0%



Source: National Bureau of Statistics
Non-food prices rose by 2.1 per cent in July, year on year, up from a reading of 1.7 per cent in June.The price of pork – a staple meat on Chinese plates – fell by 43.5 per cent compared with a year earlier in July.
We believe domestic inflationary pressure is largely controllable, and Beijing will unlikely overreact to the stronger-than-expected July inflation data
Nomura analysts
“In our view, the elevated PPI inflation reading has been a result of supply-side constraints as Beijing sticks to curbing output in high-polluting industries, while the lower CPI inflation was due mainly to a high base (especially for pork and vegetable prices) in July 2020, when China was severely hit by the damaging flooding along the Yangtze River, despite more visible pass-through effects from rising PPI inflation to non-food CPI inflation,” said analysts at Nomura.
“We believe domestic inflationary pressure is largely controllable, and Beijing will unlikely overreact to the stronger-than-expected July inflation data. Instead, we expect Beijing to maintain its unique policy mix of ‘targeted tightening plus universal easing’ through the remainder of this year.”
This puts the policymakers in a dilemma: inflation is rising and growth is slowing
Zhiwei Zhang
China’s economy has largely recovered from disruptions caused by the coronavirus pandemic, but the expansion is losing steam as businesses face intensifying strains from higher commodity prices and global supply chain bottlenecks.
“This puts the policymakers in a dilemma: inflation is rising and growth is slowing. The pandemic worsened and caused more disruption in the global supply chain,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The signal from the weekend by [former health minister] Gao Qiang suggests that China will likely continue to follow a ‘zero tolerance policy’. Such policy means China will scrutinise cross-border movement of cargo and travellers, which will probably put further stress on the supply chain. We think the inflation pressure may persist in the second half of the year.”


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China’s official producer price index (PPI) rose by 9 per cent in July from a year earlier, compared with 8.8 per cent in June
The consumer price index (CPI) rose by 1 per cent in July from a year earlier, compared with a 1.1 per cent rise in June



China’s official producer price index (PPI) rose by 9 per cent in July from a year earlier, while the consumer price index (CPI) rose by 1 per cent last month.


China economy

China manufacturing

China inflation: factory-gate price growth quickened in July, higher than expected

China’s official producer price index (PPI) rose by 9 per cent in July from a year earlier, compared with 8.8 per cent in June The consumer price index (CPI) rose by 1 per cent in July from a year earlier, compared with a 1.1 per cent rise in June

China’s official producer price index (PPI) rose by 9 per cent in July from a year earlier, compared with 8.8 per cent in June

The consumer price index (CPI) rose by 1 per cent in July from a year earlier, compared with a 1.1 per cent rise in June