China July PPI Slows to 3.5% as Oil Shock Fades

China's factory-gate inflation eased for the first time since the Iran war began in late February. The producer price index rose 3.5% in July from a year earlier, the National Bureau of Statistics said Sunday. That came in below the 4.1% gain recorded in June and missed economist expectations.

Consumer inflation also decelerated. The CPI rose 0.5% in July, down from 1% the prior month. The core measure, which strips out food and energy, eased to 0.9% from 1%.

The data suggest the cost shock from higher global oil prices is starting to fade. Crude fluctuated wildly through June and July, but average costs still fell from their peak earlier this year. China had emerged from a record bout of deflation only to face new price pressures from the war. Now those pressures are receding.

A divergence in profits has opened up between upstream and downstream sectors. Industries like clothes-making are seeing earnings plunge. Energy producers, by contrast, are enjoying soaring profits. Sluggish domestic consumer spending has limited how much factories can pass on higher production costs for oil, chips and metals.