20230810-招银国际-Deflation_bottomed_with_possible_mild_reflation_7页_704kb

China's economic inflation report for July 2023 shows a continued deflationary trend, with CPI growth dipping to -0.3% YoY due to sluggish consumer demand and sharp drops in food and energy prices. Core CPI showed a marginal increase to 0.8% YoY, driven by recovery in services like travel and healthcare. PPI declined but narrowed its YoY drop to -4.4% due to base effects and raw material demand, with minor month-on-month improvements.

Looking ahead, deflationary pressure may be bottoming out as domestic demand recovers and overseas commodity prices rebound. Forecasts for 2023 CPI growth are lowered to 0.6%, while PPI is expected to drop 2.7%. The government is likely to loosen credit and property policies to stimulate durable consumption and investment, potentially through PBOC measures like RRR cuts and policy rate adjustments.

Key risks include increased debt burden from deflation, and the report suggests further policy easing in the second half of 2023 to support economic growth, with GDP projections expected to improve. Data is based on sources like Wind and CMBIGM, with additional context from charts showing MoM changes and inflation indicators.