Data released by China's National Bureau of Statistics (NBS) on Wednesday showed that both year-on-year Consumer Price Index (CPI) and Producer Price Index (PPI) have fallen in July.
CPI declined by 0.3 percent and PPI dropped by 4.4 percent.
However, on a monthly basis, CPI reversed its decline as consumption continued to recover in July, shifting from a decrease of 0.2 percent in the previous month to an increase of 0.2 percent.
Notably, core CPI, which excludes food and energy prices, rebounded substantially. It recorded a 0.8 percent year-on-year rise, or a 0.4 percentage point increase from the previous month.
Dong Lijuan, the NBS chief statistician, said that the month-on-month decline in CPI is temporary.
CPI is expected to rise gradually, as China's economy continues to improve, market demand expands steadily and impact of the high comparison base gradually diminishes, Dong added.
Additionally, both month-on-month and year-on-year decreases in PPI narrowed in July.
Dong noted that the decreases were influenced by factors such as sufficient domestic production supply, improved demand in certain industries, and international commodity prices.
Bruce Pang, chief economist and head of research at JLL Greater China, anticipated that PPI, on a yearly basis, may rebound faster than CPI. The subsequent decreases is expected to narrow month by month.
He highlighted that money supply and total social financing still have room to grow, especially with a potential cut to the reserve requirement ratio in the third quarter. In the short term, cutting the reserve requirement ratio would be more likely compared to reducing interest rates, he added.