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China's Inflation Rises; PPI Drops For First Time In Nearly 3 Years

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China's consumer prices rose marginally in July but producer prices decreased for the first time in nearly three years, official data revealed Friday.

Consumer price inflation rose to 2.8 percent in July from 2.7 percent in June, the National Bureau of Statistics reported. The rate was forecast to remain unchanged at 2.7 percent.

On a monthly basis, consumer prices climbed 0.4 percent in contrast to a 0.1 percent fall in June.

The major factors behind high inflation were fresh fruits and pork prices. Prices of fresh fruits surged 39.1 percent and pork prices jumped 27 percent.

Inflation excluding food and energy grew 1.6 percent in July from previous year, the same pace as seen in June.

In a separate communiqué, producer prices decreased 0.3 percent on year, after remaining unchanged in June. This was the first decline in producer prices since August 2016. Prices were forecast to fall 0.1 percent.

Month-on-month, producer prices decreased 0.2 percent in July.

Producer price deflation is likely to intensify in the coming quarters given that a downturn in property construction will probably weigh on Chinese steel prices, alongside the broader drags to industry from a wider slowdown in economic growth, Julian Evans-Pritchard and Martin Rasmussen, said.

The economists added that the upshot is that China faces the worse of both worlds. Accelerating consumer prices that will weigh on household confidence and real income growth, but at the same time, the return of factory-gate deflation that will put further downward pressure on manufacturing profits, which are already contracting, they noted.

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