June CPI rose 1.5% YoY, flat from May, slightly lower than the expected 1.6%. Sequentially, CPI fell 0.2% MoM, basically in line with the seasonal growth. On an annualized seasonally adjusted basis, CPI rose 1.9%, down from last month’s 2.8%.

Food CPI fell 1% MoM in June: Egg prices fell by 3.4%; fresh vegetables fell 1.1%, but narrower than the decline (-12.5%) in last June; fresh fruit prices fell 4.2%, down more than the same period last year (-2.5%).

Non-food prices rose 0.1% MoM: the tourism prices rose 1.7% seasonally; vehicle fuel prices fell 2.1%, thanks to lower oil prices; rents for rental housing rose 0.3%; the overall service price rose 0.3%.

PPI grew 5.5% in June, in line with expectations, and flat from May. June PPI fell 0.2%, narrowed from -0.4% in April and -0.3% in May. By sector, coal and oil prices fell; nonferrous metals; building materials and non-metallic prices rose; the upstream ferrous metal (mining) prices fell, but the downstream ferrous metal (smelting and rolling processing) prices rose slightly. June industrial producer purchase prices fell 0.4% MoM, compared with the previous two months’ 0.3% decline.

Looking ahead, CPI is expected to grow moderately, but higher base will drag down PPI’s YoY growth further. Egg prices rose significantly in June, but have dropped since the end of June. The latest June manufacturing PMI beat expectation, reflecting current economic growth is robust. The ferrous, nonferrous and coal prices rebounded recently. In the coming months, however, as the base goes up, the YoY growth rates of PPI will fall further. Monetary policy is likely to remain neutral.