China factory inflation slows for first time
For the first time since the outbreak of the Iran war in late February, factory inflation in China has receded. The producer price index rose by 3.5% in July compared to the same month last year, which is slower than expected and down from a 4.1% increase in June, reflecting a easing of cost pressures driven by the oil shock. Consumer inflation also dropped to 0.5% in July, while the core consumer price index, excluding food and energy, declined to 0.9%. This indicates the beginning of China's recovery from the inflation wave caused by rising global commodity prices. However, domestic spending remains weak, leading to mixed profit results across industrial sectors—some, like the clothing industry, experiencing declines, while others, such as energy companies, seeing gains. The data suggests that the impact of rising commodity prices is starting to lessen, as average oil costs have fallen despite volatility. Indicators also point to China moving away from a phase of sharp inflation, evidenced by decreases in pork prices and tourism services, which reflect weak domestic demand and subdued spending during the summer holiday season.
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