China CPI inflation slows in July, factory gate prices steady

The cost of living in China retreated last month as the rate of advance in non-food prices slowed to a seven-month low.

Wednesday's data reflected a slowdown in activity levels amid tighter economic policies out of Beijing, according to Capital Economics.

China's consumer price index advanced at a 1.4% year-on-year clip in July, which was down from the 1.5% pace observed in the month before.

Economists on the other hand had expected the rate of gains in CPI to be unchanged at 1.5%.

Food price deflation eased a tad, rising from -1.2% to -1.1% but that was more than offset by a drop in non-food prices from 2.2% for June to a 2.0% in July - a seven-month low - Julian Evans-Pritchard at Capital Economics explained.

While softer energy cost pressures were partly to blame, at the 'core' level, which excludes both food and energy, CPI was lower too, the analyst said.

Factory gate inflation on the other hand was steady for a third-month running, at 5.5% year-on-year. Versus June, producer prices rose on the month for the first time in three months, he added, but attributed that "entirely" to the recent pick-up in steel prices which he believed was unlikely to be sustained.

"Rising steel prices aside, broader price pressures appear to have cooled last month. We expect the reflation of the past year to continue to fizzle out in coming quarters as policy tightening dampens economic activity."