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The National Bureau of Statistics reported that the producer price index increased 3.5 percent from a year earlier in July to mark its lowest reading in three months. The figure came below the 3.8 percent median forecast in a Reuters poll of economists and followed a 4.1 percent gain in June. On a monthly basis factory gate prices dropped 0.7 percent after a 0.3 percent decline the previous month according to the bureau’s data. The bureau’s release also showed consumer prices rising 0.5 percent year on year in July down from 1.0 percent in June and the weakest pace in six months. Food prices fell 1.5 percent while the core consumer price index which strips out volatile food and energy costs climbed 0.9 percent the National Bureau of Statistics said. Consumer prices edged down 0.1 percent from the prior month against expectations for a 0.2 percent increase.
Lower oil prices combined with weakening demand caused both consumer and producer price inflation in July to come in below expectations according to Zhaopeng Xing at ANZ. Oil price trends remain uncertain meaning their impact on inflation is also likely to be uncertain Xing added in remarks reported by Reuters. The data points to a two speed economy where factory output and exports have held up while domestic demand stays soft the ANZ strategist noted. ANZ Research maintains its forecast for full year producer price growth of 2.5 percent and consumer inflation of 1.0 percent with an M shaped trajectory expected through the remainder of 2026.
The July figures follow a period in which geopolitical tensions including disruptions linked to the Middle East helped lift producer prices and end a prior deflationary streak according to analysts tracking the data. Factory activity contracted in July separate survey readings showed adding to evidence of softening momentum in the world’s second largest economy. Zhiwei Zhang chief economist at Pinpoint Asset Management said the economic momentum softened in the second quarter in comments carried by Reuters. The Politburo in July signalled stronger fiscal spending as the policy response and the transmission of that fiscal spending will take time Zhang added.
Chinese leaders have pledged to accelerate fiscal outlays on infrastructure and other measures to support growth in the second half of the year according to official statements. The National Bureau of Statistics data highlighted divergent trends with upstream and high tech sectors showing firmer profit margins while many domestic manufacturers continued to face price pressures. Earlier in 2026 producer prices had posted stronger annual gains before the July moderation the bureau’s historical series indicates. Economists continue to monitor for signs that subdued domestic consumption could prolong disinflationary effects.
The National Bureau of Statistics figures arrive as authorities work to curb excessive competition and price wars in certain industries that had previously dragged on producer prices. Separate data from the bureau showed urban consumer prices rising at a slightly different pace than rural areas though overall trends aligned with national aggregates. The July release provides the most recent snapshot ahead of further policy announcements expected in coming months. Market participants will assess whether the easing inflation prints prompt additional stimulus steps from Beijing.
