The producer price index in China rose 5.5 percent in July from a year earlier versus an estimated 5.6 percent in a Bloomberg survey. The consumer price index increased 1.4 percent versus a forecast of 1.5 percent, way below the government ceiling of 3 percent.
China's producer price gains held steady on surging commodity prices, as demand stayed resilient and the government's drive to reduce industrial capacity takes hold.
Soaring prices of commodities such as coal, steel and cement extended a sweet spot for industrial firms, which have enjoyed solid profits and, through China's massive supply chains, have underpinned global reflation since last year.
The government's drive to reduce industrial capacity capped supply of raw materials while demand from property and infrastructure projects has held up so far.
Month-on-month producer price- growth turned positive from previous declines on the back of steel and nonferrous metal price rebounds, according to a statement by the NBS. Half of the 40 industrial sectors being surveyed have seen price gains in July, nine sectors more than the previous month, it said.
"With policy tightening now weighing on economic activity, underlying inflation has already begun to decline," said Julian Evans-Pritchard, a China economist at Capital Economics in Singapore.
"With growth likely to slow further in the coming quarters, we think the pick- up in price pressures witnessed during the past year will continue to unwind."