China’s factory-gate prices fell more than expected in July, underscoring persistent deflationary pressures in the world’s second-largest economy despite signs of stabilization in consumer prices.
The Producer Price Index (PPI) declined 3.6% year-on-year, matching June’s steep drop and worse than the forecasted 3.3% fall, highlighting continued weakness in industrial demand.
The Consumer Price Index (CPI) was unchanged from a year earlier, outperforming expectations of a slight decline. On a monthly basis, CPI rose 0.4%, above the 0.3% forecast, while core inflation excluding volatile food and energy prices edged up to 0.8%, the highest in 17 months.
Economists say the divergence between stable consumer prices and falling producer prices reflects sluggish domestic demand and overcapacity in key sectors such as electric vehicles, solar panels, and steel. These structural issues, combined with a prolonged real estate downturn and strained U.S.–China trade relations, continue to weigh on economic momentum.
Beijing has rolled out “anti-price war” measures aimed at halting aggressive discounting, particularly in the auto sector, to prevent further erosion of corporate margins. While these policies have sparked rallies in industries like steel and cement, analysts warn they are insufficient to address deep-rooted imbalances without broader demand-side stimulus and structural reform.
Investor sentiment remains cautious, with many waiting to see whether the government will introduce more forceful measures to revive growth.
