China’s consumer and wholesale inflation rebounded in August, offering limited evidence of improving domestic demand. The producer price index rose 3.8% year over year, exceeding economists’ 3.6% Reuters-poll forecast and July’s 3.5% increase, the weakest in three months. Consumer prices rose 0.8%, matching expectations and accelerating from July’s 0.5%. Core CPI, excluding food and energy, increased 1%, versus 0.9% in July. The National Bureau of Statistics attributed the rebound to volatile global commodity prices, seasonal food-price gains and stronger demand in high-tech industries. Economists said favorable base effects and higher commodity costs explained much of the gain, while household demand remained weak as Beijing’s trade-in subsidies and other consumption measures faded. The Iran war has also driven oil prices higher in recent months. Nguyen Hoang Nam of Capital Economics said factory-gate inflation was concentrated in energy-related sectors, while consumer-goods prices continued to fall, signaling soft demand and persistent industrial overcapacity. Electronics-price inflation reached a record high amid global memory-chip shortages. Nam expects consumer and producer inflation to ease if Gulf energy flows normalize, with producer prices returning to deflation next year. Tianchen Xu, senior economist at the Economist Intelligence Unit, said services lacked their usual seasonal price increase because summer tourism was weaker than normal. The broader outlook remains difficult. Danske Bank cut its 2026 GDP growth forecast to 4.6% from 4.8% and its consumer-inflation forecast to 0.8% from 1%. Chief China economist Allan von Mehren cited falling home prices, high savings, weak employment and slow consumption, saying confidence and private spending would remain weak until housing improves. Second-quarter growth was the slowest in more than three years. July retail sales and urban investment weakened, increasing pressure on Beijing to provide support. Urban youth unemployment reached 17.9% in July, the highest since August 2025.
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China's wholesale inflation tops estimates in August on commodity costs, tech demand as consumer price increases meet forecast
August consumer and producer inflation exceeded or matched expectations, but economists cited base effects, commodity costs and high-tech demand rather than stronger household spending. Housing weakness, excess capacity, unemployment and fading subsidies continue to constrain China’s recovery.