China's consumer prices stable in July; deflation pressures and weak demand persist; trade truce with US nears expiry
According to AFP, the official data from the National Bureau of Statistics showed that the Consumer Price Index (CPI) was unchanged year-on-year, beating Bloomberg's forecast of a 0.1% decline.
However, prices fell in rural areas (down 0.3%) and for consumer goods (down 0.4%).
While falling prices may seem good for shoppers, economists warn prolonged deflation can hurt growth, as households delay purchases in anticipation of further drops.
China's already fragile consumer confidence has been dampened by a prolonged property slump and high youth unemployment, trends worsened by trade tensions with the US.
After four straight months of decline, CPI inched up in June, helped by a slowdown in falling car and smartphone prices. But experts remain cautious.
"It's still unclear if this is the end of deflation," Zhiwei Zhang, chief economist at Pinpoint Asset Management said, AFP reported.
"Nonetheless it is still unclear if this is the end of deflation in China. The property sector has not stabilised. The economy is still supported more by external demand than domestic consumption," he added.
The Producer Price Index (PPI), which tracks factory gate prices, dropped 3.6% in July, matching June's fall, marking nearly three years of declines. This persistent slump has squeezed company profit margins amid intense price wars.
China's foreign trade saw a rebound in July compared to last year, but uncertainty looms as the tariff truce with the US ends Tuesday, raising the risk of renewed higher tariffs.
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