According to Bloomberg, the growth rate of the Producer Price Index (PPI) in China has recently slowed to 3.5% from 4.1% in June, while the Consumer Price Index (CPI) has decreased from 1% to 0.5%. This indicates that the price pressures caused by rising oil prices are gradually easing.
Although China has emerged from a prolonged period of deflation, weak domestic consumer demand continues to limit companies' ability to pass on rising production costs to final consumers. As a result, profits in sectors such as clothing manufacturing are declining, while energy companies are recording revenue growth.
Bloomberg notes that average prices for raw materials, including oil, have decreased in recent months compared to the peak levels at the beginning of the year, which helps alleviate inflationary pressures.
At the same time, economists continue to warn that persistent weak inflation in China could negatively impact economic growth in the long term by limiting consumption, investment, and employment.
In July, prices for tourism services, hotels, and airline tickets also fell, as domestic demand during the summer season was weaker than expected.
