Other analysts said that the government would likely respond to the persistently weak data and roll out more infrastructure spending.
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According to the report, reduced downward pressure on prices was the main factor which helped the consumer inflation in the world’s second-largest economy rise to 1.6 percent, AFP reported.
The new Caixin purchasing managers’ index (PMI) declined to a two-year low of 47.7 in July from June’s 49.4, suggesting weakness in the Chinese manufacturing sector.
Factory-gate prices of excavated oil and natural gas dropped 34.6 per cent in July, while those of ferrous metal fell 20.1 per cent, according to NBS.
The price of the staple meat in China is one of the most important factors the NBS considers when formulating the CPI.
China’s inflation has entered a “pork price cycle”. But with product prices continuing to drop, fundraising costs for businesses have not declined notably.
The Ministry of Agriculture predicted that pork demand will slightly exceed supply in the coming months.
For the first seven months, CPI increased 1.3 per cent year on year.
Slowing economic growth and decrease in commodity prices have worked to keep China’s consumer inflation in control check.
Lian Ping, chief economist with the Bank of Communications, predicted consumer inflation in the world’s second largest economy will be milder. It was the worst since October 2009 and the 40th straight month of price decline.
Weak demand caused by shrinking business activity will in turn sink commodity prices.
China has set an annual inflation target at about 3 per cent.
“Policy focus is definitely the [producer] deflation at this stage”, said Zhou Hao, economist at Commerzbank AG in Singapore.
“Although the Chinese economy is probably bottoming out, growth momentum is still anemic”, said Zhang.
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The central bank has already cut interest rates four times since November and lowered the RRR for big banks by 150 bps.
