Consumer Price Index (CPI) Flat Year-on-Year in June, Producer Price Index (PPI) Continues to Decrease
According to data released by the National Bureau of Statistics, the consumer price index (CPI) in June remained flat compared to the same period last year, with a slight decrease of 0.2% compared to the previous month. Meanwhile, the producer price index (PPI) experienced a decline of 5.4% year-on-year, and a decrease of 0.8% month-on-month.
Dong Lijuan, the chief statistician of the Urban Department of the National Bureau of Statistics, stated that the consumer market was relatively stable in June, resulting in a slight decrease in the CPI compared to the previous month and no change compared to last year. Factors such as the continuous drop in bulk commodity prices like oil and coal and the high comparison base from the same period last year contributed to the decline in the PPI both month-on-month and year-on-year.
Experts in the industry believe that the implementation of consumption policies will further accelerate the recovery of residents’ consumption, leading to a steady increase in the core CPI in the coming months.
Food prices, in particular, saw a year-on-year increase. Data shows that food prices rose by 2.3% in June compared to the same period last year, exhibiting a 1.3 percentage point increase from the previous month. This rise was primarily driven by the increased prices of fresh vegetables, potatoes, fresh fruits, and poultry, ranging from 4.3% to 10.8% year-on-year. However, the price of pork experienced a 7.2% year-on-year decrease, with the decline rate expanding by 4.0 percentage points from the previous month.
On the other hand, non-food prices displayed a decrease of 0.6% year-on-year in June, compared to a flat rate in the previous month. Among non-food items, service prices rose by 0.7% year-on-year, with a slight drop of 0.2 percentage points in growth rate. Industrial consumer goods saw a decline of 2.7% year-on-year, indicating a 1.0 percentage point expansion in the rate of decline.
Zhou Maohua, a macro researcher at China Everbright Bank, attributed the decrease in the PPI to the continuous fall in pork and crude oil prices, robust supply in the domestic consumer goods market, and the higher comparison base from last year. Merchants cutting prices to promote sales also had an impact on commodity prices. While the CPI in June was flat year-on-year, it fell slightly below market expectations, according to Wen Bin, the chief economist of Minsheng Bank.
Looking ahead, Wang Qing, the chief macro analyst of Oriental Jincheng, predicts that further strengthening of consumption promotion policies in the third quarter will accelerate the recovery of residents’ consumption and result in a steady increase in the core CPI. By the fourth quarter, with the diminishing base effect, the overall CPI is expected to resume steady year-on-year growth, reaching approximately 2.0% year-on-year.
Regarding the PPI, which decreased both month-on-month and year-on-year in June, Dong Lijuan explained that this was due to the continued decline in prices of bulk commodities such as oil and coal and the high comparison base from the same period last year. From a month-on-month perspective, the PPI fell by 0.8% in June. The rate of decline narrowed by 0.1 percentage points compared to the previous month. The PPI decline was primarily driven by a 1.1% decrease in the price of means of production, while the price of means of living decreased by 0.2%, the same as the previous month.
Year-on-year, the PPI in June fell by 5.4%, with an increase of 0.8 percentage points compared to the previous month. This increase in the year-on-year decline was mainly attributed to the continued drop in prices in industries such as oil and coal.
Experts believe that the year-on-year decline in the PPI is expected to narrow as the base effect weakens. Wen Bin analyzed a trend showing that the current PPI continues to bottom out, with upstream prices weaker than downstream prices, the means of production weaker than the means of living, and durable goods weaker than non-durable goods. As the impact of last year’s base effect diminishes, the year-on-year decline in the PPI is projected to narrow.
Reflecting this trend, Zhou Maohua stated that the PPI in June essentially bottomed out when compared to the previous year. He expects the subsequent PPI to gradually improve year-on-year, driven by increased macroeconomic policies, an accelerated pace of demand recovery, industrial companies shifting from passive destocking to active inventory replenishment, and a weakening base effect.