Kathmandu— China’s consumer prices experienced a moderate increase in July, according to data released by the National Bureau of Statistics (NBS) on Sunday, indicating room for pro-consumption policies in the latter half of the year. The Consumer Price Index (CPI), a key measure of inflation, rose 0.5 percent year-on-year last month, while the core CPI – excluding food and energy – increased by 0.9 percent over the same period. A slowdown in gasoline price increases was a primary factor influencing the overall figures, alongside fluctuations in international markets.

Inflation Trends and Contributing Factors

The year-on-year CPI growth narrowed by 0.5 percentage points from June, largely due to a deceleration in gasoline price increases which rose only 1 percent year on year – a 16 percentage point decrease from the previous month. This reduction accounted for approximately 0.45 percentage points of the decline in headline CPI growth and pulled down overall energy price growth to 0.6 percent. Industrial consumer goods, excluding energy, saw a slower increase of 1.5 percent year on year, contributing 0.37 percentage points to the CPI growth.

Monthly Price Fluctuations

On a month-on-month basis, the CPI edged down by 0.1 percent in July, though this decline was less pronounced than in June. International market price fluctuations led to a 10.7 percent decrease in domestic gasoline prices month on month, impacting the CPI by about 0.35 percentage points. Food prices remained flat, while service prices saw a slight increase of 0.4 percent, contributing positively to the monthly CPI figure.

Policy Implications and Analyst Views

Analysts suggest that these price trends create space for potential policy adjustments. Wang Qing, chief macro analyst at Golden Credit Rating, stated there is “considerable room for pro-consumption policies in the second half of the year,” adding that price factors will not be a major constraint on possible interest rate cuts by the central bank. The Political Bureau of the Communist Party of China Central Committee recently emphasized strengthening macroeconomic policy and accelerating fiscal fund disbursement to promote equipment renewals and trade-ins of consumer goods.

Local Initiatives to Boost Consumption

Several local authorities are already implementing measures to stimulate consumption, including expanding trade-in programs. Chongqing has broadened subsidy categories for home appliances and smart home products, while Hunan Province added ten new categories – encompassing items like service robots and smart toilets – to its existing program. Wen Bin, chief economist at China Minsheng Bank, anticipates a further increase in pro-consumption policies, particularly during the summer vacation period and the National Day holiday, which are expected to boost prices in tourism, accommodation, and catering.

Sunday’s data also revealed that China's producer price index increased by 3.5 percent year on year in July, suggesting a potential lagged effect on consumer prices as equipment renewal policies take hold.

(With inputs from Xinhua)

Originally published on abcnews.com.np.