China’s July PPI beats forecast with 9% rise, CPI up 1%

China’s factory gate inflation rose faster than expected in July due to oil and coal price hikes while consumer inflation eased slightly last month, according to official data released on Monday.

The producer price index (PPI) grew by 9 percent year on year in July, a little higher than a Reuters analyst poll that expected the PPI to rise by 8.8 percent, unchanged from June.

The PPI, a benchmark gauge of a country’s industrial profitability, inched up 0.5 percent on a monthly basis, mainly due to the price hike of oil and coal, according to an analysis post online by National Statistics Bureau.

The prices of steel and non-ferrous metal have slightly dropped, showing the initial effect of China’s policy of ensuring supply and stabilizing prices in the commodity sector, the analysis post said.

“We expect PPI inflation to moderate to 8.6 percent y-o-y in August on a stabilization of raw material prices,” Lu Ting, Nomura’s chief China economist, said in an email to CGTN, adding he believes the PPI will “stay above 8.0 percent in the subsequent months before falling to around 7.0 percent towards year-end.”

Meanwhile, the consumer price index (CPI) grew by 1 percent year on year last month, after a 1.1-percent gain in June, slightly higher than Reuters’ poll of 0.8 percent.

Lu warned moderate upside risks to food prices may be seen in coming months from the heavy rainfall and flooding in central China’s Henan Province in late July.

China’s economy has largely recovered from disruptions related to the pandemic, and more trips resumed during the summer holiday. Therefore, prices of flights, traveling and accommodation rose by 24.3 percent, 7.3 percent and 3.8 percent respectively, official data showed.