SCIO briefing on China's economic performance in July 2025

Beijing Youth Daily:

We have noticed that the data shows China's CPI rose 0.4% month on month, shifting from a 0.1% decrease in June. Meanwhile, the growth rate of the core CPI has also been accelerating for three consecutive months. What according to your analysis are the main reasons for this? Additionally, what will be the future trends in CPI in the next stage?

Fu Linghui:

Thank you for your questions. July witnessed positive changes in consumer prices in China, characterized by a shift from a month-on-month decrease to increase, and continuously expanding growth the in the core CPI year on year.

On a month-on-month basis, the CPI rose 0.4% in July, compared with a 0.1% decline in June. The month-on-month price shift from decline to growth was primarily driven by increases in the prices of services and industrial consumer goods.  First, driven by the peak summer travel season, prices of transportation-related services increased significantly, leading to a rebound in service prices. In July, the prices of air tickets, travel, hotel accommodation and vehicle rentals rose by 4.4%-17.9% month on month, collectively pushing up the monthly CPI by around 0.21 percentage point. In July, service prices increased by 0.6% month on month, expanding significantly compared with the previous month. Second, policies aimed at boosting consumption took effect, leading to a rebound in the prices of some industrial consumer goods. The monthly CPI rose by approximately 0.05 percentage point in July, driven by price increases ranging from 0.5% to 2.2% for items such as household appliances, daily necessities, recreational durables and personal care products. In July, the prices of industrial consumer goods excluding energy increased by 0.2% month on month, expanding slightly compared with the previous month. In addition, driven by changes in international oil prices, rising energy costs also contributed to the month-on-month increase in the CPI. In July, energy prices increased by 1.6% month on month.

Given that food and energy prices in the CPI are more susceptible to short-term factors, analyzing price changes requires looking not only at the headline CPI but also at the core CPI, which provides a better reflection of the underlying inflation trend. On a year-on-year basis, despite the impact of a larger fall in food prices, the headline CPI remained flat in July. However, the core CPI excluding food and energy was up 0.8%, representing a 0.1 percentage point acceleration in the pace of increase from the previous month and the third straight month of widening gains. Overall, since the beginning of this year, it has shown a trend of stability with a moderate increase, indicating positive changes in market supply and demand.

The year-on-year increase in core CPI has continued to expand, mainly due to the effective implementation of special actions to boost consumption since the beginning of this year. Potential for goods and services consumption was gradually released, which helped drive price up. The steady advancement of the construction of a unified national market, along with efforts to curb cutthroat low-price competition in accordance with laws and regulations, also promoted the price rebound. First, the expansion of the trade-in policy for consumer goods and the regulation of corporate competition have driven a rebound in the prices of related industrial consumer goods. In July, the prices of industrial consumer goods excluding energy increased by 1.2% year on year. The growth rate accelerated by 0.2 percentage point from the previous month, marking the third consecutive month of expansion, and contributed 0.29 percentage point to the year-on-year increase of the CPI. Specifically, the prices of household appliances increased by 2.8% year on year, while the declines in prices for fuel-powered cars and new energy cars narrowed by 0.8 percentage point and 0.6 percentage point, respectively, compared with the previous month. Second, as household consumption upgrades and demand for services continue to grow, service prices have remained firm with an upward trend. In July, service prices increased by 0.5% year on year, a growth rate that outpaced the headline CPI and contributed about 0.19 percentage point to its change. This rise continues the upward trend observed since March. Specifically, household services and education services rose by 1.7% and 1.1% year on year, respectively, higher than the overall price increase for services. In addition, the prices of gold and platinum jewelry rose 37.1% and 27.3% year on year, respectively, in July, also contributing to the year-on-year increase in core CPI.

In summary, July saw generally stable operation of consumer prices and the continued emergence of positive changes. However, the market remained characterized by supply outstripping demand, keeping prices at low levels. Going forward, the results from policies including expanding domestic demand and advancing the development of a unified national market are expected to become more evident, and positive forces supporting a reasonable rise in the general price level will keep building up. Thank you.