China CPI Misses Forecast, PPI Hits Near 4-Year High
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- China's CPI rose 1% year-on-year in June, missing the 1.1% Reuters poll estimate and slowing from 1.2% in May, with core CPI also edging down to 1% from 1.1% and food prices falling 1.6%
- China's PPI jumped 4.1% year-on-year in June — the strongest growth since July 2022, per LSEG data — though it declined 0.3% month-on-month, with EIU's Tianchen Xu attributing the year-on-year spike to a low-base effect from June 2024's 3.6% plunge
- Factory-gate inflation was lifted by Middle East conflict-driven commodity costs and surging demand for AI computing power pushing up semiconductor and tech-equipment prices, per the National Bureau of Statistics
- June's official PMI showed input-cost inflation easing to a six-month low of 54.2 from 60.5, with the output-price sub-index contracting to 48.2 from 51.9 — the first contraction this year
- The IMF raised China's 2025 growth forecast to 4.6% from 4.4% on Wednesday while trimming the global outlook to 3%, crediting high-tech manufacturing, export performance, and frontloaded infrastructure investment
- Evercore ISI's Neo Wang described the two-speed economy — robust exports versus weak consumption and housing — as a defining long-term feature, with consumer sentiment weighed down by a negative wealth effect from the prolonged housing downturn
- Teneo's Gabriel Wildau said policymakers are likely to refrain from major new stimulus unless the slowdown persists, identifying the late-July Politburo meeting as the next opportunity to escalate policy action
Why it matters: The 4.1% PPI jump — the strongest since July 2022 — sits directly against a CPI that missed forecasts, confirming the structural two-speed economy analysts increasingly see as permanent. With China targeting 4.5%–5% growth for the year and the IMF already penciling in 4.6%, Beijing has little incentive to roll out consumer stimulus, making the late-July Politburo meeting the key catalyst for any policy shift if the export-led resilience falters.
