Government sources: Inflation down to 7.1% in June

Consumer price inflation in China decreased to 7.1% in June, Reuters reported, citing government sources familiar with the matter. This represents a significant decline on the 7.7% figure posted in May. For the first six months of the year, consumer prices were 7.9% higher than the same period a year ago, exceeding the government's official target of 4.8% for the year. China's consumer price basket is heavily weighted toward food, and food price growth has been slowing as supply of staples like pork improves. However, China's producer price index (PPI) has continued to rise, suggesting continued inflationary pressure in the production pipeline. The government sources quoted by Reuters indicated June's PPI was "still high," but did not provide details.

For more on China's long-term inflation challenges, see this report from our July issue.