article

Data released by the National Bureau of Statistics on the 12th showed that in May, China's Consumer Price Index (CPI) rose by 0.3% year-on-year, the same increase as the previous month; the Producer Price Index (PPI) for industrial products fell by 1.4% year-on-year, with the decline narrowing by 1.1 percentage points compared to the previous month.

Dong Lijuan, Chief Statistician of the Urban Department of the National Bureau of Statistics, stated that in May, the consumer market operated generally smoothly, with the national CPI seasonally declining on a month-to-month basis, and the year-on-year increase remaining the same as the previous month. The core CPI, which excludes food and energy prices, rose by 0.6% year-on-year, continuing its moderate increase.

On a year-on-year basis, the CPI increased by 0.3%, with the same increase as the previous month. Among them, food prices fell by 2.0%, with the decline narrowing by 0.7 percentage points compared to the previous month, affecting the CPI to decline by approximately 0.37 percentage points year-on-year. Non-food prices rose by 0.8%, with the increase falling by 0.1 percentage points compared to the previous month, affecting the CPI to rise by approximately 0.68 percentage points year-on-year.

According to estimates, in the 0.3% year-on-year change in CPI for May, the carryover effect was approximately 0, and the new impact of this year's price changes was about 0.3 percentage points.

Advertisement

Despite seasonal declines in the prices of fresh vegetables and fruits, the rise in pork prices has led to a reduction in the drag on the food category. According to the Ministry of Agriculture and Rural Affairs, on May 31, the average price of pork in the national agricultural product wholesale markets was 22.66 yuan per kilogram, up 11.79% from 20.27 yuan per kilogram on April 30, and up 17.65% from 19.26 yuan per kilogram in the same period last year.

A macro report from CICC analysis stated that as supply increases and weather disturbances decrease, vegetable prices have fallen on a month-on-month basis and decreased year-on-year; pork prices have continued to rise positively on both a year-on-year and month-on-month basis, driven by second fattening and market holding sentiments; service prices have further increased under the stimulus of consumption during the "May Day" holiday, with the peak travel period of the holiday and the reform of public utility prices driving up the prices of transportation and residential fuel.

Regarding the trend of CPI in the next phase, Wu Ge, Chief Economist of Changjiang Securities, said in his participation in the First Financial Chief Research that the CPI in the second quarter is still expected to fluctuate slightly above zero on a year-on-year basis. Given the delayed impact of previous supply contractions on pork prices, related prices will support the rebound of CPI in the second half of the year, but the increase will be limited.

Liu Aihua, spokesperson for the National Bureau of Statistics, recently stated at a press conference held by the State Council Information Office that in the next phase, as the weather warms up and supply increases, food prices will still be at a seasonal low. Industrial consumer goods, under the influence of the policy of replacing old with new, are expected to see a rebound in consumer demand, with prices generally stabilizing and slightly rising. Service prices are expected to continue to rise, driven by the gradual recovery of service demand. Based on these factors, the CPI in the next phase is expected to rebound moderately at a low level.

In terms of PPI, in May, influenced by the upward trend of some international bulk commodity prices and the improvement of the supply and demand relationship in the domestic industrial product market, the national PPI turned from a decline to an increase on a month-on-month basis, and the year-on-year decline narrowed.

On a month-on-month basis, PPI turned from a 0.2% decline in the previous month to a 0.2% increase, changing the trend of six consecutive months of decline. Among them, the price of means of production turned from a 0.2% decline in the previous month to a 0.4% increase; the price of consumer goods fell by 0.1%, with the decline being the same as the previous month.In year-on-year terms, the Producer Price Index (PPI) fell by 1.4%, with the rate of decline narrowing by 1.1 percentage points compared to the previous month. Specifically, the price of means of production decreased by 1.6%, with the rate of decline narrowing by 1.5 percentage points; the price of consumer goods decreased by 0.8%, with the rate of decline narrowing by 0.1 percentage point.

CICC's macro team stated that the easing of geopolitical risks, coupled with a cooling of speculative sentiment, has suppressed international oil prices. Early summer in many parts of the country, combined with the approaching peak electricity usage season, has boosted the prices of thermal coal. The passive reduction in copper production due to smelting losses has supported copper prices, and supply disruptions have driven the recovery of aluminum prices. Recent policy efforts and improved macroeconomic expectations have led to a rise in the prices of black metals on both a monthly and yearly basis. Overall, the increase in commodity prices may provide some support to the PPI.

Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, said that domestic industrial product prices are expected to continue to improve, mainly because there is significant room for recovery in domestic consumption and internal demand. The industrial sector is also actively adjusting and optimizing the supply structure. The deflationary situation in international energy and raw material commodities is showing signs of improvement, and with last year's base being relatively low, the year-on-year decline in PPI is expected to continue to narrow.