China Producer Prices Extend 34-Month Deflation Streak

China’s producer prices rose 3.5% yoy in July 2026, slowing from a 4.1% gain in the previous month and falling short of market estimates of 3.8%. It was also the lowest producer inflation since April amid weak domestic demand and fading energy cost pressures as global oil shocks tied to disruptions in the Strait of Hormuz began to ease. Prices of production materials continued to rise, albeit at a milder rate (4.8% vs 5.5% in June) due to further increases in the cost of mining (16.4% vs 16.5%), raw materials (6.1% vs 8.6%), and processing (3.1% vs 3.0%). Meanwhile, consumer goods prices remained weak (-0.8% vs -0.9%), as prices fell further for food (-2.1% vs -2.1%), clothing (-1.1% vs -1.0%), and daily-use goods (-1.0% vs -1.0%), while durable goods prices picked up (0.4% vs 0.1%). On a monthly basis, producer prices fell 0.7%, faster than a 0.3% drop in June. In the first seven months of the year, producer prices rose 1.8%, steeper than a 1.5% gain in the prior period.

China’s producer prices increased 4.1% year-on-year in June 2026, accelerating from a 3.9% rise in the previous month and matching market forecasts. It was the fourth consecutive monthly increase and the steepest pace since July 2022, driven by firmer commodity prices and rising production costs as geopolitical tensions in the Middle East continued to underpin global energy and raw material markets. Production material costs quickened (5.5% vs 5.2% in May), led by further increases in mining (16.5% vs 15.8%), raw materials (8.6% vs 9.2%), and processing (3.0% vs 2.3%). Meanwhile, a decline in consumer goods prices persisted (-0.9% vs -0.8%), as costs continued to fall for food prices (-2.1% vs -1.8%), clothing (-1.0% vs -1.0%), and daily-use goods (-1.0% vs -1.0%), while durable goods prices were subdued (0.1% vs flat reading). For the first six months of the year, PPI rose 1.5%, keeping the same pace as in the prior period.

China’s producer prices increased 3.9% year-on-year in May 2026, accelerating from a 2.8% rise in the previous month and matching market forecasts. It was the third consecutive monthly increase and the fastest pace since July 2022, driven by soaring global commodity and energy prices amid supply disruptions stemming from the war in Iran. Beijing’s efforts to cut excess industrial capacity and curb intense price competition also helped lift factory-gate prices. Production material costs accelerated (5.2% vs 3.8% in April), driven by stronger increases in mining (15.8% vs 10.8%), raw materials (9.2% vs 7.1%), and processing (2.3% vs 1.5%). A decline in consumer goods prices eased (-0.8% vs -1.0%), despite continued decreases in food prices (-1.8% vs -1.9%), clothing (-1.0% vs -1.1%), and daily-use goods (-1.0% vs -1.1%), while durable goods prices were unchanged (vs 0.3%). For the first five months of the year, PPI climbed 1.0%. Monthly, PPI rose 0.5%, easing from a 1.7% gain in April.