China Consumer Inflation Hits 2-Year High: Here's What Mainly Drove It


China’s consumer price index rose to a two-year high of 2.7% in July, while its factory-gate inflation hit a 17-month low, with producers’ price index rising 4.2% year-on-year, according to the National Bureau of Statistics.

What Happened: According to the NBS, the uptick in July inflation was led by a rise in prices of pork, fresh vegetables, and other foods, along with seasonal factors. 

The month of July saw overall food prices rising by 6.3% year-on-year, while pork prices posted the first ever annual increase since September 2020.

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At the same time, fresh fruit and vegetable prices rose 16.9% and 12.9%, respectively, from a year ago.

Expert Take: Bruce Pang, head of research and chief economist at Jones Lang LaSalle Inc told Bloomberg that inflation would likely rise past 3% in the next two months due to a low base and higher pork prices. 

“But core inflation will likely stay benign as domestic demand remains weak. This won’t cause much restriction to the monetary policy,” he said.

Capital Economics expects factory-gate price inflation in China to slow and turn negative briefly next year, according to Reuters.

Price Movement: The Shanghai Composite Index continues to trade in the red after the data, shedding 0.37% in afternoon trade.


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