Clothing prices were up 1% and transport costs were down 4.7%. The prices of automobiles fell 4.4% and the prices of mobile telephones fell 2.6%. On the other hand, prices of airfares and hotels increased 10% while prices of movie tickets increased 5.9%. These movements reflect the shift in consumer spending away from goods and toward services.Ĭhinese authorities said that they expect a rebound in inflation in the coming months. That is because the low inflation right now is partly due to the base effect of high inflation from a year ago. When that fades, annual inflation will likely resume in positive territory. Even if that happens, inflation will likely remain relatively low due to the weakness of the economy, weak consumer demand, and weak global commodity prices. Also, when volatile food and energy prices are excluded, core prices were up 0.8% in July from a year earlier. This underlying rate of inflation is still very low.īy category, food prices fell 1.7% in July versus a year earlier, largely due to a sharp decline in pork prices. Nonfood prices were unchanged in July from a year earlier. Here are the details: In July, Chinese consumer prices fell 0.3% from a year earlier, the first decline since February 2021. Prices were up 0.2% from the previous month, which suggests a modest positive rate of inflation. Now, however, as Western economies struggle to bring inflation down from 40-year highs, China is suddenly struggling with deflation. This was not meant to be. Rather, when China finally removed all pandemic-related restrictions at the end of 2022, there was an expectation that economic growth would soar while inflation would rise commensurately. Neither happened. Instead, the economy has sputtered while inflation decelerated. In the years just prior to the pandemic, China experienced much higher inflation than in the major Western economies. Then, with COVID-19 restrictions, China transitioned to deflation by the end of 2020. Then, inflation rebounded to a modest level, rising above 2% during much of 2022.
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