China's July consumer inflation tops forecast, producer deflation persists

BEIJING (Reuters) -- China's consumer prices rose at a faster-than-expected rate in July, while producer deflation persisted, as Beijing ramps up support for its frail consumer sector in the face of a sputtering economic recovery.

The data comes in the wake of shrinking manufacturing activity and raised concerns about the outlook for exports at a time of soft domestic demand that has hobbled the world's second-biggest economy.

The consumer price index (CPI) edged up 0.5% from a year earlier in July, versus a 0.2% rise in June, the National Bureau of Statistics (NBS) reported on Friday, beating a 0.3% increase in a Reuters poll of economists.

Core inflation, excluding volatile food and fuel prices, gained 0.4% in July, down from 0.6% in June.

On a month-on-month basis, the CPI rose 0.5% against a 0.2% fall in June and a forecast 0.3% increase.

High temperatures and rainfall in some areas last month pushed up food prices, partly contributing to the monthly return to growth, said NBS statistician Dong Lijuan.

Weak domestic demand has become a major pain point for the economy, while hopes for an export-led recovery have also been crimped by rising trade tensions with the West, tariffs on Chinese goods and fears of a U.S. recession.

Consumers have largely shunned incentives to revive consumption, as a prolonged housing downturn, job insecurity and a wall of local government debt inhibit them from purchases of especially big-ticket items.

Car sales, the biggest component of China's retail sales, fell for the fourth month running in July despite a national auto trade-in program and eased auto loan rules.

China's capital city Beijing posted a 6.3% slide in retail sales in June while the financial hub of Shanghai saw the gauge of