Consumer Prices Well-Anchored
China's consumer inflation held steady through the first half of 2026. The CPI rose 1.0% year-on-year in H1 2026, matching the level seen throughout the year, with June alone at +1.0% YoY and -0.3% month-on-month. Core CPI (excluding food and energy) also printed at +1.0% in June, leaving ample room for monetary easing without overheating concerns.
Price Drivers
- Food: -1.2% YoY — a mild deflationary pull on the headline
- Non-food: +1.4% YoY — services and travel driving services-side inflation
- Gold: +28.1% YoY — safe-haven and investment demand elevated
- Gasoline: +17.0% YoY — energy pass-through visible in transport costs
Factory-Gate Prices Turn the Corner
After a prolonged period of producer-price deflation, the PPI rose 4.1% year-on-year in June 2026 — the highest reading in approximately four years. The month-on-month fall of 0.3% suggests the pace of monthly gains is moderating, but the year-on-year swing from deflation into positive territory reflects firmer commodity prices and a gradual normalisation of industrial margins.
Policy Window Remains Open
With CPI anchored near 1% and PPI in expansion, the policy mix can stay accommodative without stoking inflation. The PBOC retains flexibility to guide loan prime rates lower, while fiscal authorities can sustain targeted spending on domestic demand.