China inflation hits 29-month low at 2.2%YoY

Thanks to the 3.8% slowdown in food prices.

Dr. Liao Qun from CITIC Bank International said that CPI inflation in China eased substantially to 2.2% y-o-y in June from May's 3.0% y-o-y, which is a 29 month low and beats the average market estimate of 2.3% y-o-y.

"While the easing is across the board, a sharp slowdown in food prices from May's 6.4% y-o-y to 3.8% y-o-y in June is the major contributor. The price rises for vegetables, meat and grain have all moderated rapidly," he added.

Lia Qun further said, "From macro perspectives, the inflation easing reflects a further weakening of consumer demand in domestic market, which is in turn a direct outcome of continued slowdown in China economy. It is also a result of rapidly receded imported inflation given the sharp declines in international commodities prices, which are however reflection of the persistence of the weakness of the global economy."

"Looking forward, however, if the European situation can stabilise, the growth should rebound from Q3 with accelerated policy easing," he said.