July Inflation Data from the National Bureau of Statistics
China's consumer price index rose 0.5% year-on-year in July 2026, down from 1.0% in June, as energy prices moderated and food costs exerted continued drag. Core CPI (excluding food and energy) edged up 0.9% year-on-year. The PPI gained 3.5%, falling 0.6 percentage points from June's 4.1% reading as factory-gate prices softened on a month-on-month basis.
Services Buck the Trend
Services prices accelerated from flat (0.0% MoM) in June to +0.4% MoM in July, contributing approximately 0.21 percentage points to the CPI — driven by summer holiday travel and consumer services demand. Gold prices, however, continued their strong run, posting a 28.1% YoY gain in June, reflecting elevated safe-haven demand.
Policy Implications
With CPI running well below the government's 3% target and PPI losing momentum, the policy room for accommodation remains ample. The PBOC's August LPR held at 3.0% for the one-year tenor and 3.5% for five years, as the central bank signalled a "moderately loose" stance. Low inflation removes near-term overheating concerns and allows targeted support for demand recovery without monetary tightening.
The subdued PPI reading — on the back of a 0.7% MoM factory-gate decline in July — warrants monitoring: renewed upstream deflation could weigh on industrial profitability and capex intentions if the trend persists through Q3.