China’s CPI for July registered a drop of -0.3% yoy, marking its first decline since February 2021. Although this result is slightly better than the market’s expectation of a -0.4% drop, it underscores the economic headwinds faced.
Core inflation measure, which excludes the often erratic food and energy costs, showed a rise to 0.8% yoy from a mere 0.4% yoy. This points to some underlying demand within the economy, albeit muted.
A deeper dive into CPI reveals that food prices have seen a -1% fall yoy, a sharp contrast to the 2.3% yoy rise observed in the previous month. On the other hand, non-food prices climbed 0.5% yoy last month, bouncing back from a -0.6% yoy.
Dong Lijuan, chief statistician at the NBS, commented, “With the impact of a high base from last year gradually fading, the CPI is likely to rebound gradually.”
On the PPI front, situation remains challenging. PPI improved from -5.4% yoy to -4.4% yoy in July. This figure not only missed market expectations, which stood at -3.8% yoy, but also marked the tenth straight month of negative readings.
ECB Lagarde: Key challenge is not to overreact to transitory supply shocks
In a speech, ECB President Christine Lagarde said, “the key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term, while also nurturing the positive demand forces that could durably lift inflation towards our 2% inflation target.”
And, “once the pandemic emergency comes to an end – which is drawing closer – our forward guidance on rates as well as purchases under the asset purchase programme will ensure that monetary policy remains supportive of the timely attainment of our medium-term 2% target.”
Full speech here.