Finance

Last year was tough for all investors, but ones that hang out on Reddit suffered more than most. The Roundhill Meme exchange-traded fund, which tracks meme stocks, fell from $70 a share to $25. Fellow travellers in the covid-19 bubble, including non-fungible tokens (which use blockchains to sell digital artefacts) and spacs (blank-cheque initial public offerings), also collapsed, leaving apes (retail investors) with few options but to hodl (hold on for dear life) or cut their losses. Proclamations of the death of meme investing may, however, have been hasty. Meme stocks are now shooting past the rest of the market, which has itself surged. The meme index is up by nearly 60% this year, outperforming the s&p 500 by 40 or so percentage points. Returns on individual holdings are more bonkers still, even if some stocks have risen from a low base. Shares in SoFi, a fintech firm, have doubled; the market capitalisation of Palantir, a software-maker, has nearly tripled; stocks in Carvana, a car retailer, are up by 800%. Apes are going all in, some with their entire 401k retirement plans. There is no clearer evidence of a bull market.Some of the rallies, at a stretch, even make sense. Redditors view good news as a burst of rocket fuel for share prices. Carvana, which was teetering on the edge of bankruptcy, has averted a crisis by putting up more collateral in exchange for a debt cut. Palantir is riding the ai wave. A judge in Delaware recently rejected plans to further dilute shareholders in amc, a cinema chain and one of the early More

It can sometimes be difficult to wrap one’s head around the world’s second biggest economy. But three headlines in the space of two days—August 8th and 9th—captured the predicament that China now faces. Exports fell by more than 14% in dollar terms. Country Garden, one of the country’s biggest property developers, missed two coupon payments on its dollar bonds. And annual consumer-price inflation turned negative. In sum: China’s export boom is long over. Its property slump is not. And, therefore, deflation beckons.Ever since China imposed its first brutally effective lockdown on Wuhan in early 2020, its economy has been out of sync with the rest of the world’s. When the country abandoned its ruinous zero-covid controls at the end of last year, many economists hoped that the exceptionalism would continue, and that China would stage a rapid recovery, even as other big economies courted recession. The expectation also raised a fear. Analysts worried that China’s renewed appetite for commodities and other goods would put upward pressure on global inflation, making the lives of central bankers elsewhere even harder. Neither the hopes for growth nor the fears of inflation have been realised.Instead, China is now struggling to meet the government’s modest growth target of 5% for 2023 (“modest” because last year provides such a low base for comparison). Far from becoming an inflationary force in the global economy, the country is now flirting with falling prices. According to the data released on August 9th, consumer prices dropped by 0.3% in July compared with a year earlier. Viewed in isolation, that is no great cause for alarm. A solitary month of mild deflation is not sufficient to turn China into the next Japan. Consumer inflation has been negative before—in 30 months this century, and as recently as 2021. Moreover, July’s figure says almost as much about pork’s past as it does about China’s economic future. Prices for the country’s favourite meat were unusually high in July last year. They have since fallen by a quarter, contributing to the negative headline number. But consumer prices are not the only ones in the trough. The prices charged by producers (at the proverbial “factory gate”) have now declined year-on-year for ten months in a row. Those fetched by China’s exports dropped by more than 10% in July, according to estimates by analysts at ubs, a bank. And the gdp deflator, a broad measure that covers all the goods and services produced in the country, fell by 1.4% in the second quarter compared with a year earlier. That is only its sixth decline this century and its steepest since 2009. Many economists foresaw the drop in pork and food prices. They assumed, however, that it would be offset by a faster increase in the cost of services, as China’s economy gathered steam. They also expected that the property market would stabilise, which would prop up demand for other goods, both upstream (in products such as steel and construction equipment) and down (in those such as furniture and household appliances).After a brief revival in the early months of the year, property sales are faltering again. Those in 30 big cities fell by 28% in July compared with the year before. Declines in rents and the prices of household appliances both contributed to the negative turn in consumer prices in July. Country Garden also blamed “a deterioration in sales”, among other things, for its failure to pay its bondholders on the expected date this month. The company has a 30-day grace period before it falls into default.China’s government is also now up against the clock. In recent weeks a rotating cast of committees, ministries and commissions has unveiled a variety of measures to improve the economy. A 31-point plan to encourage private enterprise announced that the government would remove barriers to entry and strengthen intellectual-property rights. A 20-point plan to expand consumption touted cheaper tickets for scenic spots, among other goodies. A 26-point plan to increase labour mobility promised to make it easier for rural migrants to settle in cities (and easier for foreign businesspeople to get visas).Yet if the property market does not improve, deflationary pressure will persist. The longer it lasts, the more difficult it will be to reverse. Thus a more forceful fiscal and monetary push is required. ubs calculates that the government’s deficit, broadly defined, shrank in the first half of this year, providing less support to the economy. Meanwhile, the central bank has barely cut interest rates, reducing its short-term policy rate from 2% to 1.9%. That is not enough to keep up with the decline in inflation, which means the real cost of borrowing is rising (see chart). In order to defeat deflation, the budget deficit will have to widen. And the central bank’s efforts will need to go beyond 0.1 point. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Country Garden, one of the largest non-state-owned developers by sales, has reportedly missed two coupon payments on dollar bonds that were due Sunday.
Meanwhile, Dalian Wanda saw its senior vice president Liu Haibo taken away by police after the company’s internal anti-corruption probe, Reuters reported.

Pictured here are residential buildings developed by Country Garden Holdings Co. in Baoding, Hebei province, China, on Tuesday, Aug. 1, 2023.
Qilai Shen | Bloomberg | Getty Images

BEIJING — Two years after Evergrande’s debt troubles, worries about China’s real estate sector are coming to the forefront again.
Country Garden, one of the largest non-state-owned developers by sales, has reportedly missed two coupon payments on dollar bonds that were due Sunday. Citing the firm, Reuters said the bonds in question are notes due in February 2026 and August 2030.

Country Garden did not immediately respond to CNBC’s request for comment on the reports.
Meanwhile, Dalian Wanda saw its senior vice president Liu Haibo taken away by police after the company’s internal anti-corruption probe, Reuters reported Tuesday, citing a source familiar with the matter. Dalian Wanda did not immediately respond to a CNBC request for comment.
Hong Kong-listed shares of Country Garden closed more than 1.7% lower on Wednesday, after sharp declines earlier in the week.
“With China’s total home sales in 1H23 down year-on-year, falling home prices month-on-month across the past few months and faltering economic growth, another developer default (and an extremely large one, at that) is perhaps the last thing the Chinese authorities need right now,” according to Sandra Chow, co-head of Asia Pacific Research for CreditSights, which is owned by Fitch Ratings.

We are concerned that as big cities lift local property restrictions, it will drain up demand in low tier cities, which account for 70% of national new home sales volume…

An investor relations representative for Country Garden didn’t deny media reports on the missed payments and didn’t clarify the company’s payment plans, Chow and a team said in a note late Tuesday.

The report noted negative market sentiment spillover to other non-state-owned developers such as Longfor. Shares of Longfor closed about 0.8% higher Wednesday in Hong Kong after trading more than 1% lower during the day.
“Overall homebuyer sentiment is likely to also suffer as a result,” the analysts said.

Home prices in focus

China’s massive real estate market has remained sluggish despite recent policy signals. In late July, its top leaders indicated a shift toward greater support for the real estate sector, paving the way for local governments to implement specific policies.
Uncertainties remain around the sensitive topic of home prices.
“We are concerned that as big cities lift local property restrictions, it will drain up demand in low tier cities, which account for 70% of national new home sales volume and are the real drivers of commodity demand and construction activity,” Nomura analysts said in an Aug. 4 report.

“We are also concerned that merely easing restrictions on existing home sales without lifting restrictions on home purchase may add supply and depress home prices,” the report said.
For the last several years, Chinese authorities have attempted to curb debt-fueled speculation in the country’s massive — and hot — real estate market. In 2020, Beijing cracked down on developers’ high reliance on debt for growth.
Highly indebted Evergrande defaulted in late 2021, followed by a few others.

With that faltering confidence, the private property sector will likely remain a drag on the country’s growth for the rest of the year.

Rhodium Group

Last year, many people halted mortgage payments after a delay in receiving the homes they had bought. Most apartments in China are sold before they are completed.
“After watching developers default and fail to complete housing for other families, few Chinese families are willing to shell out in advance for new housing,” Rhodium Group analysts said in a note this week. “With that faltering confidence, the private property sector will likely remain a drag on the country’s growth for the rest of the year.”
The analysts pointed out that new starts in residential construction have fallen for 28 months straight.
Real estate and related industries have accounted for about a quarter of China’s economy.
Redmond Wong, market strategist at Saxo Markets Hong Kong said Country Garden will find it “very difficult, if not impossible” to refinance — and other Chinese developers would face difficulties raising money as a result, especially offshore.
He pointed out that since China started its deleveraging campaign in 2016, it is very unlikely the state would step in to bail out real estate developers. “The most likely way for Country Garden or Chinese developers in similar situation to avoid defaults will be asset sales,” Wong added.

State-owned developers stand out

China’s state-owned developers have generally fared better in the latest real estate slump.
Country Garden has had the worst sales performance so far this year among China’s 10 largest real estate developers, with a 39% year-on-year decline in sales, according to data published by E-House Research Institute.

Stock chart icon

Vanke was the only other one of the 10 developers to post a year-on-year sales decline for January to July period, down 9%, the research showed.
The other names were mostly state-owned, such as Poly Development, which ranked first with a 10% sales increase during that time, according to the analysis.
But that’s had little impact on home prices overall.
Nomura pointed out in a separate report that average existing home prices dropped by 2% in July from the prior month, worse than the 1.4% decline in June, based on a Beike Research Institute data sample of 25 large cities.
The July level is 13.4% below a historical high two years ago, the Nomura report said.

Read more about China from CNBC Pro

The seven-day moving average of new home sales as of Aug. 6 was down by 49% versus 2019, according to Nomura. That’s worse than the 34.4% decline for the prior week.
Far more Chinese household wealth has been locked up in property than is the case in many other countries.
Tight capital controls also make it difficult for people in China to invest outside the country, while the local financial markets are less mature than those of developed countries.
“Right now people are reassessing what in the future will be a good investment,” Liqian Ren, leader of quantitative investment at WisdomTree, said in an interview last week.
“Since the beginning of last year, people are starting to realize real estate prices are not going up,” Ren said. “I don’t think it’s the lack of confidence. For many people they still have money in the bank.”
— CNBC’s Hui Jie Lim contributed to this report. More

An inflatable Disney+ logo is pictured at a press event ahead of launching a streaming service in the Middle East and North Africa, at Dubai Opera in Dubai, United Arab Emirates, June 7, 2022.
Yousef Saba | Reuter

Check out the companies making headlines after the bell.
Disney — The entertainment giant added about 5% in extended trading after posting mixed quarterly results. Disney reported adjusted earnings of $1.03 a share, versus the 95 cents expected by analysts, per Refinitiv. Revenue came in at $22.33 billion, behind the $22.5 billion expected. The company also posted a roughly 7% decrease in Disney+ subscribers during the period and announced a hike in streaming prices.

Wynn Resorts — The casino stock rose 2.5% on second-quarter results that topped expectations on the top and bottom lines. Wynn Resorts reported adjusted earnings of 91 cents per share on revenue of $1.6 billion. That came in ahead of the 59 cents and $1.54 billion expected by analysts, per Refinitiv.
AppLovin — AppLovin shares surged 22% on strong second-quarter results and optimistic third-quarter revenue guidance. The game developer said it expects $780 million to $800 million in revenue for the third quarter, ahead of the $741 million expected by analysts. The company posted earnings of 22 cents per share for the second quarter, ahead of the 7 cents expected by analysts, according to Refinitiv.
Illumina — The DNA sequencing company shed more than 6% after the bell on weaker-than-expected guidance. Illumina topped Wall Street’s expectations for the second quarter, but said it anticipates some weakness in the second half, due to a protracted recovery in China and more cautiousness in purchasing from customers. The company expects full-year revenue to rise 1% year over year, versus the 7.1% uptick analysts expected, per Refinitiv.
The Trade Desk — Shares lost nearly 4% after the bell despite The Trade Desk posting better-than-expected quarterly results and slightly strong-than-anticipated guidance for the current period. The advertising technology company reported adjusted earnings of 28 cents per share on revenue of $464 million. That topped the 26 cents per share on $455 million in revenue expected, according to Refinitiv.
Sonos — The wireless speaker maker’s stock jumped 11% in extended trading on stronger-than-expected results. Sonos reported a smaller-than-expected loss of 18 cents per share on revenue totaling $373 million. Analysts surveyed by Refinitiv had anticipated a 20 cent loss per share on revenue of $334 million. The company also lifted its full-year EBITDA guidance. More

Rafael Henrique | Lightrocket | Getty Images

Check out the companies making headlines in midday trading.
Roblox — Shares tanked 22% after the online gaming platform fell short of second-quarter estimates. Roblox reported a loss of 46 cents per share, versus the 45 cent loss expected by analysts polled by Refinitiv. Revenue came in at $781 million, shy of the $785 million anticipated. The revenue figure is referred to as bookings by Roblox.

Penn Entertainment, DraftKings — Shares of sports betting company Penn Entertainment surged 9.1% a day after the firm said it is partnering with Disney-owned ESPN to rebrand and relaunch its sportsbook as ESPN Bet in a 10-year deal. It’s the first time ESPN’s brand will be on a sports betting platform. Penn rival DraftKings saw shares dropping 10.9% following the news.
Upstart — Shares plunged more than 34% on disappointing guidance. Upstart, a consumer lending platform, said it expects third-quarter adjusted EBITDA and revenue to come in around $5 million and $140 million, respectively. Analysts estimated $155 million in revenue and $9.6 million in adjusted EBITDA, per StreetAccount. Despite the stock move, the company reported second-quarter results that topped estimates, including a surprise adjusted profit of 6 cents a share.
Lyft — The ride-sharing company’s shares tumbled 10% following its second-quarter earnings announcement after the bell Tuesday. Lyft posted revenue of $1.02 billion, which came in line with analysts’ estimates, according to Refinitiv. The company’s adjusted earnings came in at 16 cents per share, beating estimates of a loss of 1 cent per share. However, the company’s revenue per active user declined following the company’s efforts to reduce ride fares to compete with Uber.
Rivian — Shares of the electric vehicle maker slipped 9.9% a day after it reported a smaller-than-expected loss. Rivian posted an adjusted loss per share of $1.08 in the second quarter, while the Street anticipated a loss of $1.41 per share, per Refinitiv. Analysts, however, noted that headwinds remain for the company, which could indicate a “long path to profitability,” including steeper competition and a depletion of free cash flow.
Carvana — The online car retailer’s stock slipped nearly 6%. Carvana shared better-than-expected guidance for the third quarter, saying it expects EBITDA above $75 million. Analysts polled by FactSet called for EBITDA to come in a little over $46 million.

Twilio — Twilio added 2.2% a day after topping second-quarter earnings expectations. The company reported earnings, excluding items, of 54 cents a share on $1.04 billion in revenue. That came in ahead of the EPS of 30 cents and revenue of $986 million expected by analysts, according to Refinitiv.
Celsius Holdings — Celsius Holdings soared 20.5% after the beverage company known for its line of energy drinks beat analysts’ expectations in its second quarter. Late Tuesday, the company posted earnings of 52 cents per share, exceeding the 28 cents per share estimate from analysts polled by Refinitiv. Revenue came in at $326 million, far better than the anticipated $276 million.
Toast — The restaurant management software stock gained 14.6%. On Tuesday, Toast reported $978 million in revenue for the second quarter, beating analysts’ estimates of $942 million, per Refinitiv. The company also issued rosy guidance for third quarter and full year.
Super Micro Computer — The information technology company and beneficiary of the latest artificial intelligence craze cratered more than 23%. On Tuesday, Super Micro Computer reported adjusted earnings of $3.51 per share on revenue of $2.18 billion. Analysts surveyed by Refinitiv anticipated earnings of $2.96 per share on revenue of $2.08 billion. The company also offered guidance with a midpoint slightly above expectations.
Bumble — Dating platform Bumble slid more than 7%. On Tuesday, the company offered weak expectations for adjusted EBITDA in the current quarter when compared with a consensus estimate compiled by FactSet. The company anticipates adjusted EBITDA of $71 million to $73 million, compared with estimates of $74.8 million.
Akamai Technologies — Shares of Akamai Technologies jumped 8.5%. The software provider posted stronger-than-expected quarterly results Tuesday. The company reported earnings of $1.49 per share, excluding items, on revenue of $935.7 million, ahead of the $1.41 per share and $930.4 million anticipated by analysts, per FactSet.
Axon Enterprise — Shares of the taser maker popped 14% on strong quarterly results that topped Wall Street’s expectations. On Tuesday, Axon Enterprise posted adjusted earnings of $1.11 per share on revenue totaling $374.6 million. Analysts anticipated 62 cents in earnings per share and revenue of $350.5 million, per FactSet. The company also boosted its full-year guidance.
IAC — Shares of the media and internet company sank more than 16% on disappointing quarterly results. On Tuesday, IAC posted a larger-than-expected loss of $1.07 per share, ahead of an 82 cent loss expected by analysts, according to Refinitiv. Revenue came in at $1.11 billion, slightly behind the $1.12 billion expected.
Marqeta — Shares of the payments platform company surged about 12% a day after Marqeta announced it had struck a deal to continue servicing Block’s CashApp through June 2027. The company also reported a mixed second quarter. Marqeta lost 11 cents per share on $231 million of revenue. Analysts surveyed by Refinitiv were expecting a loss of 9 cents per share on $219 million of revenue.
— CNBC’s Hakyung Kim, Pia Singh, Brian Evans, Jesse Pound, Alex Harring, Yun Li and Sarah Min contributed reporting. More

A new issue highlighted by Moody’s may cast a pall over banks: They’ve been forced to pay customers more for deposits at a pace that outstrips growth in what they earn from loans.
The boost from higher rates was fleeting, evaporating in the first quarter of this year, when bank failures jolted depositors out of their complacency and growth in net interest margin turned negative.
In company-specific reports, Moody’s said it had place U.S. Bank under review for a downgrade for reasons including its “rising deposit costs and increased use of wholesale funding.”

Bloomberg/Getty Images

The Moody’s ratings downgrades and outlook warnings on a swath of U.S. banks this week show that the industry still faces pressure after the collapse of Silicon Valley Bank.
Concern over the sector had waned after second-quarter results showed most banks stabilized deposit levels following steeper losses during the March regional banking crisis. But a new issue may cast a pall over small and midsized banks: They’ve been forced to pay customers more for deposits at a pace that outstrips growth in what they earn from loans.

“Banks kept their deposits, but they did so at a cost,” said Ana Arsov, global co-head of banking at Moody’s Investors Service and a co-author of the downgrade report. “They’ve had to replace it with funding that’s more expensive. It’s a profitability concern as deposits continue to leave the system.”
Banks are usually expected to thrive when interest rates rise. While they immediately charge higher rates for credit card loans and other products, they typically move more slowly in increasing how much they pay depositors. That boosts their lending margins, making their core activity more profitable.

This time around, the boost from higher rates was especially fleeting. It evaporated in the first quarter of this year, when bank failures jolted depositors out of their complacency and growth in net interest margin turned negative.
“Bank profitability has peaked for the time being,” Arsov said. “One of the strongest factors for U.S. banks, which is above-average profitability to other systems, won’t be there because of weak loan growth and less of an ability to make the spread.”
Shrinking profit margins, along with relatively lower capital levels compared with peers at some regional banks and concern about commercial real estate defaults, were key reasons Moody’s reassessed its ratings on banks after earlier actions.

In March, Moody’s placed six banks, including First Republic, under review for downgrades and cut its outlook for the industry to negative from stable.

Falling margins affected several banks’ credit considerations. In company-specific reports this week, Moody’s said it had placed U.S. Bank under review for a downgrade for reasons including its “rising deposit costs and increased use of wholesale funding.”
It also lowered its outlook on Fifth Third to negative from stable for similar reasons, citing higher deposit costs.
The banks didn’t immediately return requests for comment.
The analyst stressed that the U.S. banking system was still strong overall and that even the banks it cut were rated investment grade, indicating a low risk of default.
“We aren’t warning that the banking system is broken, we are saying that in the next 12 months to 2 years, profitability is under pressure, regulation is rising, credit costs are rising,” Arsov said. More

Rick Smith, CEO of Axon Enterprises.
Adam Jeffery | CNBC

Check out the companies making headlines before the bell Wednesday.
WeWork — The stock plunged 25.7% after WeWork said in an SEC filing that there’s doubt about the company’s ability to keep operating amid weaker-than-expected membership rates. WeWork warned of measures such as a potential bankruptcy or restructuring or refinancing its debt. Its share price, which was below $1 since early this year, dropped to $0.05 in premarket trading.

Carvana — Online used-car retailer Carvana added 7.4% before the bell. Carvana expects adjusted EBITDA for the third quarter to be above $75 million, which is higher than its prior guidance and analysts’ expectations of $46.4 million, according to StreetAccount. The company, which announced a debt restructuring agreement in July, has seen its stock price soar more than 850% so far this year buoyed by short sellers rushing to cover their bets.
Lyft — Shares lost almost 6% premarket after the ride-hailing company announced its second-quarter earnings. Lyft posted revenue of $1.02 billion, in line analyst estimates, according to Refinitiv. Meanwhile, adjusted per share earnings came in at 16 cents, beating estimates of a loss of 1 cent per share.
Penn Entertainment — Shares of the entertainment and casino company gained more than 15% in early morning trading after Disney’s ESPN announced a 10-year deal with Penn to create ESPN Bet, a sports betting site. As part of the deal, Penn will pay ESPN $1.5 billion in cash. Disney’s stock price gained more than 1.8% on news of the deal.
Axon Enterprise — Shares of the military technology developer advanced 13.8% in premarket trading after reporting a beat on earnings and revenue for the second quarter. Axon posted earnings per share of $1.11, flying past analysts’ expectations of 62 cents, according to StreetAccount. Revenue came out at $374.6 million, while analysts expected $350.5 million. JPMorgan upgraded the stock to outperform and assigned a $235 price target, which suggests 34% upside.
Bumble — Dating platform Bumble slid 2.8% even after the company beat expectations for its second quarter on both lines. But Bumble offered weak expectations for adjusted EBITDA in the current quarter. 

DraftKings — The sports betting company saw its shares fall about 4.6% after Disney-owned ESPN announced a partnership with its rival Penn Entertainment on a gambling sportsbook.
Toast — Shares of the restaurant management software platform popped 14% after the company posted second-quarter earnings that topped expectations. Earnings per share of 19 cents surpassed a Street Account estimate of 1 cent per share. Toast reported $978 million in revenue, also exceeding expectations of $943.1 million.
Marqeta — Shares of the payments platform company jumped nearly 19% after Marqeta announced it struck a four-year deal to continue servicing Block’s CashApp. The company also reported a mixed second quarter. Marqeta lost 11 cents per share on $231 million of revenue. Analysts surveyed by Refinitiv were expecting a loss of 9 cents per share on $219 million of revenue.
Akamai Technologies — The cybersecurity company gained 6.4% in premarket trading after it raised its full-year guidance and reported earnings for the second quarter that surpassed Wall Street’s expectations.
— CNBC’s Hakyung Kim, Yun Li, Alex Harring and Jesse Pound contributed reporting. More

China reported a 0.3% drop in consumer prices in July from a year ago, and a 4.4% year-on-year drop in producer prices in July, according to the National Bureau of Statistics Wednesday.
Excluding food and energy prices, China’s so-called core CPI rose by 0.8% from a year ago, the highest since January, according to official data accessed via Wind Information.
Second-quarter data prompted several economists to warn of growing risk of deflation — a persistent decrease in prices over time.

Customers at a fresh food market in Shanghai, China, on Monday, Aug. 7, 2023.
Bloomberg | Bloomberg | Getty Images

BEIJING — China reported inflation data for July that pointed to a modest improvement from June.
The consumer price index fell by 0.3% in July from a year ago, but was up by 0.2% when compared with June, according to the National Bureau of Statistics Wednesday.

The year-on-year CPI print for July was slightly better than expectations for a 0.4% decline, according to analysts polled by Reuters. It was still the first year-on-year decline since early 2021, according to official data accessed via Wind Information.
The producer price index fell by 4.4% in July from a year ago, better than the 5.4% decline in June, the data showed.
However, the year-on-year PPI read was worse than the 4.1% forecast by a Reuters poll.

“Both CPI and PPI are in deflation territory,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, in a note following the data release. “The economic momentum continues to weaken due to lacklustre domestic demand.”
“The CPI deflation may put more pressure on the government to consider additional fiscal stimulus to mitigate the challenge,” he added.

A 26% year-on-year drop in pork prices, a staple food in China, contributed to the overall decline in the CPI in July. Tourism prices rose by 13.1% from a year ago.

Core CPI, which excludes food and energy prices, rose by 0.8% from a year ago — the highest since January, according to official data accessed via Wind Information.
Producer prices will likely turn higher on a year-on-year basis before the consumer price index does, said Bruce Pang, chief economist and head of research for Greater China at JLL.
He expects consumer prices will still be dragged down in the coming months by falling pork prices and a high base effect, while core CPI may gradually rise.

Sluggish consumer demand

Read more about China from CNBC Pro

Oxford Economics expects China’s consumer price index to grow by 0.5% this year and the producer price index to fall by 3.5%.
“China’s weak demand follow-through in Q2 can be attributed to its relatively contained demand-side stimulus during Covid, years of regulatory tightening, and an ongoing housing correction,” Louise Loo, lead economist at Oxford Economics, said in a note Tuesday.
It’s a “positive development” that authorities are choosing targeted easing, rather than large-scale stimulus, Loo said.
China reported trade data Tuesday that showed a sharp plunge in both overseas and domestic demand.

Exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% in U.S. dollar terms — both worse than analysts had expected.
The sharp decline in the imports figure was partly due to commodity price declines, but Loo’s estimates indicate imports declined in real volume terms by around 0.4%.
China is set on Aug. 15 to release retail sales, industrial production and other data for July.
Correction: This article has been updated to accurately reflect that Oxford Economics expects China’s producer price index to fall 3.5% this year. An earlier version of the story misstated it. More