Breaking news: China’s still teetering precariously on the brink of deflation.

Maybe that’s a bit too strong, but consumer price data out Thursday certainly suggested domestic demand remains tepid, even as the war fillip kept PPI growth positive for a fourth month.

As a quick reminder: The world’s second-largest economy has one thing and one thing only going for it right now, and that’s exports. Virtually everything else, including and especially all things related to the Chinese consumer, points to a balance sheet recession.

Although factory gate inflation picked up again in June (to 4.1%, the quickest since 2022) in Thursday’s NBS release, headline CPI undershot consensus with an uninspired 1% YoY gain.

Core CPI was likewise weak, rising 1% from the same period a year ago.

We may get one more strong PPI reading (for July), but after that, the resurgence in factory-gate price growth will probably dissipate as well.

As for consumer prices, the downshift in the YoY pace for June from May suggests the boost from higher fuel costs and successive holidays is over.

Note that although the fuel gauge still showed an outsized YoY advance, the 15% jump compared to June of 2025 was 6ppt slower than the prior month’s YoY pace.

In addition, the anomalous surge in gold prices that bolstered one of the aggregates which feeds into core price growth is in the rearview now too.

I realize this doesn’t make for the most exciting reading, but it’s important to keep track of these figures which, again, continue to evidence a balance sheet recession in China.

That’s another way of saying the economy’s still at risk of succumbing to deflation. Thank God for exports, otherwise Xi wouldn’t have much going for him economically.