China's factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back toward pre-coronavirus levels, adding to signs of recovery in the world's second-largest economy.

The producer price index (PPI) fell 2.4 percent from a year earlier in July, the National Bureau of Statistics (NBS) said in a statement, compared with a 2.5 percent decline tipped in a Reuters poll of analysts and a 3.0 percent drop in June.

Analysts say China's industrial output is steadily returning to levels seen before the pandemic paralyzed huge swathes of the economy, as pent-up demand, government stimulus and surprisingly resilient exports propel a recovery.

Iron ore futures prices in Dalian have rallied over 50 percent so far this year while prices of steel bars used in construction have jumped 12 percent.

But some economists warn the recovery could stall amid cautious consumer spending and a resurgence in global infections. Floods due to heavy rainfall have also disrupted production in some parts of the country in recent months.

Consumer inflation edged up in July as the bad weather pushed food prices higher.

The consumer price index (CPI) rose 2.7 percent from a year earlier, compared with an expected 2.6 percent increase and a 2.5 percent rise in June. Pork prices rose 85.7 percent on a yearly basis.

However, core inflation, which excludes food and energy costs, rose a mere 0.5 percent in July from a year earlier.