China's consumer prices rose at a slightly faster-than-expected rate in July partly due to weather disruptions to food supplies, while producer deflation persisted, keeping the country's underlying consumption trends soft in a test for policymakers.
China's frail consumer sector been a major focus for Beijing as weak domestic demand hobbles the world's second-biggest economy while manufacturing activity shrinks.
The consumer price index (CPI) edged up to a five-month high of 0.5% year-on-year in July, versus a 0.2% rise in June, the National Bureau of Statistics (NBS) reported on Friday, beating a 0.3% increase in a Reuters poll of economists.
On a month-on-month basis, the CPI rose 0.5% against a 0.2% fall in June and a forecast 0.3% increase.
High temperatures and rainfall in some areas last month pushed up food prices, partly contributing to the monthly return to growth, said NBS statistician Dong Lijuan.
Food prices swung from a drop of 2.1% on-year in June to an unchanged outcome in July, while the growth in non-food prices slowed from 0.8% in June to 0.7% last month.
"There's a sharp contrast between food and ex-food CPI... none of the other goods and services saw inflationary moves, suggesting no sign of a pickup in domestic demand," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Core inflation, excluding volatile food and fuel prices, gained 0.4% on-year in July, down from 0.6% in June.
Weak domestic demand has become a major pain point for the economy, while hopes for an export-led recovery have also been crimped by rising trade tensions with the West, tariffs on Chinese goods and fears of a U.S. recession.
Consumers have largely shunned incentives to revive consumption, as a prolonged housing downturn, job insecurity and a wall of local government debt inhibit them from purchases of especially big-ticket items.
Car sales, the biggest component of China's retail sales, fell for the fourth month running in July despite a national auto trade-in program and eased auto loan rules.
China's capital city Beijing posted a 6.3% slide in retail sales in June while the financial hub of Shanghai saw the gauge of consumption fall 9.4%, underperforming a national rise of 2%, per official data.
The producer price index (PPI) was down 0.8% in July from a year earlier, unchanged from the previous month, and above an expected 0.9% fall.
($1 = 7.1502 yuan)
