China July PPI falls 3.6%, CPI flat: Weak demand, housing slump keep deflation fears alive | investingLive

China’s factory-gate prices fell more than expected in July, while consumer prices were flat, signalling that weak domestic demand and trade uncertainty continue to weigh on the economy.

The data was published over the weekend, ICYMI:

Consumer prices were unchanged from a year earlier, versus June’s 0.1% rise and beating expectations for a 0.1% decline. Core CPI rose 0.8% y/y, the highest in 17 months, driven by non-food items, while food prices fell 1.6%. On a monthly basis, CPI rose 0.4%, reversing June’s 0.1% drop.

The producer price index (PPI) dropped 3.6% y/y — matching June’s near two-year low and missing forecasts for a smaller 3.3% decline. It was the 25th consecutive month of PPI contraction, reflecting ongoing price competition and overcapacity in key industries. On a monthly basis, PPI fell 0.2%, an improvement from June’s 0.4% drop. Authorities have launched measures to curb “disorderly competition” in sectors like autos, which some analysts expect could start lifting PPI from August.

Extreme weather — heatwaves along the eastern seaboard and heavy rains in other regions — added to economic pressures. While some see signs that deflationary pressures may be easing, others caution that without stronger demand-side stimulus, recovery may be limited. A prolonged housing slump, fragile US trade ties, and a weak labour market remain key headwinds.