BEIJING—China's consumer inflation ticked up slightly in July but remained tame enough to give policy makers plenty of room to use more aggressive measures to boost a sluggish economy.
Meanwhile, factory prices continued their more than three-year decline, posing a deflation threat and adding to pressure for further more stimulus measures.
"China's monetary and fiscal policies have to become more supportive over the rest of the year," said Liu Li-Gang, an economist at ANZ.
China's consumer-price index rose 1.6% in July from a year earlier, picking up pace from the 1.4% year-over-year rise in June, data from the National Bureau of Statistics showed on Sunday. The producer-price index dropped 5.4% in July from a year earlier, accelerating its decline from a 4.8% year-over-year drop in June, and exceeding market forecasts. The PPI also declined 0.7% in July from June. In June, it fell 0.4% from the preceding month. The year-over-year fall in the producer-price index is the worst in nearly six years.
'We expect the PPI to stay in negative territory through the first half of next year.'
China's economic growth in the second quarter came in at 7% year-over-year—better than expected but still the slowest pace in six years.
An expanded version of this report appears at WSJ.com.
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