China’s consumer prices slipped deeper into deflation in August, with CPI down -0.4% yoy after July’s flat reading, worse than expectations of -0.2% yoy and the weakest in six months. Food prices were the main drag, falling -4.3% yoy versus -1.6% yoy previously. On a monthly basis, CPI was unchanged, undershooting forecasts for a small 0.1% mom rise.
At the same time, core inflation showed signs of life, rising 0.9% yoy in August compared with 0.8% yoyin July — the fastest pace in two and a half years. The pickup suggests underlying demand in services and other non-food sectors is holding up better than headline numbers imply, even as consumers face falling food costs.
Producer prices continued to contract, though at a slower pace. PPI dropped -2.9% yoy, in line with expectations and an improvement from -3.6% yoy in July. The figures highlight China’s ongoing struggle with persistent factory-gate deflation, which has now lasted nearly three years.
