China Economics: Cooling Activity and Inflation – July Data Preview

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China Economics: Cooling Activity and Inflation – July Data Preview

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03 Aug 2026 22:33:12 ET │ 8 pages

China Economics

Cooling Activity and Inflation – July Data Preview

CITI'S TAKE

Xiangrong Yu AC

Activity indicators could slow further in July, partly due to extreme weather +852-2501-2754

events, even as the AI supercycle continues to power trade. The LPR xiangrong.yu@citi.com

decision in August could be a watchpoint following the Politburo’s green

light to monetary policy adjustment. Xinyu Ji AC

+852-2501-2792

How much further could activities slow? — Activity indicators are set to soften in xinyu.ji@citi.com

July, partly due to extreme weather events and seasonal slowdown. We expect AC Yuanliu Huindustrial growth to decelerate to 4.8%YoY in July, with production subindex in the

PMI survey slipping into contractionary territory. The reading could still be higher +852-2501-2746

than the low rates seen in April and May given buoyant high-tech sectors and a more yuanliu.hu@citi.com

benign base. We pencil in retail sales growth of 1.5%YoY, expecting its 2yr CAGR to

soften marginally. Pace of trade-in subsidies distribution weakened again into July:

daily average sales dropped to ~RMB6.3bn in July vs. ~RMB9.0bn in June as we

calculated based on MoFCOM’s release (SCIO, Jul 23rd). Auto sales stayed in deep

contraction at -18.0%YoY (Sina, Jul 29th). An investment rebound may not take place

in July with weather events and yet-to-accelerate policy deployment. Contraction

in cumulative FAI could deepen to -6.5%YoY Ytd.

A hiccup in export strength? — We expect marginal slowdown of trade activities in

July, with exports at 22.0%YoY, imports at 30.0%YoY and trade surplus at

US$100.8bn. Logistic disruptions from typhoons, heavy rains and other weather