China’s July consumer prices rise faster than expected, producer deflation persists By Reuters

BEIJING (Reuters) – China’s consumer prices rose at a faster-than-expected pace in July as producer deflation continued as Beijing steps up support for its fragile consumer sector in the face of an economic recovery shaken.

The data comes as manufacturing activity fell and raised concerns about the outlook for exports at a time when weak domestic demand has hampered the world’s second largest economy.

The consumer price index (CPI) rose 0.5% from a year earlier in July, compared with a 0.2% increase in June, the National Bureau of Statistics (NBS) reported on Friday, surpassing a 0 .3 percent in a Reuters poll of economists.

Core inflation, excluding volatile food and fuel prices, rose 0.4 percent in July, down from 0.6 percent in June.

On a month-to-month basis, CPI rose 0.5 percent versus a 0.2 percent fall in June and an expected 0.3 percent increase.

High temperatures and rainfall in some areas pushed up food prices last month, partly contributing to the monthly rebound in growth, said NBS statistician Dong Lijuan.

Weak domestic demand has become a major pain point for the economy, while hopes for an export-led recovery have also been dampened by rising trade tensions with the West, tariffs on Chinese goods and fears of a US recession.

Consumers have largely avoided incentives to revive spending as a prolonged housing slump, job insecurity and a wall of local government debt prevent them from buying particularly large items.

Car sales, the largest component of China’s retail sales, fell for a fourth straight month in July despite a nationwide car surrender program and easing of auto loan rules.

China’s capital Beijing saw retail sales fall 6.3 percent in June, while financial hub Shanghai saw consumption fall 9.4 percent, underperforming national growth of 2 percent, according to official data .

The producer price index (PPI) fell 0.8% in July from a year earlier, unchanged from the previous month and above an expected 0.9% decline.

Chinese leaders pledged in late July that the stimulus measures needed to meet this year’s economic growth target would be aimed at consumers, days after they announced the allocation of 300 billion yuan (41.96 billion dollars) in ultra-long Treasury bonds to finance equipment upgrades and consumer goods exchanges.

(1 USD = 7.1502 renminbi)