On June 10th, data released by the National Bureau of Statistics showed that in May, the Consumer Price Index (CPI) fell by 0.1% month-on-month and rose by 1.2% year-on-year. The core CPI, which excludes food and energy prices, increased by 1.1% year-on-year. Meanwhile, the Producer Price Index (PPI) rose by 0.5% month-on-month and 3.9% year-on-year.
An economist from China Minsheng Bank commented that price movements in May presented a picture of overall CPI stability coupled with continued PPI growth. Influenced by declines in energy and service prices, both the CPI and core CPI shifted from month-on-month increases to decreases, while their year-on-year growth rates remained stable above 1%. In contrast, driven by imported factors and rising demand in certain domestic sectors, the PPI continued its month-on-month ascent, with its year-on-year increase reaching the highest level since July 2022.
From a month-on-month perspective, the national CPI fell by 0.1% in May, compared to a 0.3% rise in April, primarily affected by changes in energy and service prices.
Influenced by the pass-through of international oil prices, domestic gasoline prices shifted from a 12.6% increase in April to a 0.3% decrease in May. This led energy prices to turn from a 5.7% rise in April to a 0.1% fall in May, changing their impact on the month-on-month CPI from a positive contribution of 0.39 percentage points in April to a negative drag of 0.01 percentage points in May. Due to the seasonal decline in travel demand following the May Day holiday, service prices shifted from a 0.5% increase in April to a 0.1% decrease in May, altering their effect on the month-on-month CPI from a positive contribution of 0.22 percentage points in April to a negative drag of 0.03 percentage points in May. Additionally, food prices fell by 0.4%, with the rate of decline narrowing by 1.2 percentage points compared to April, impacting the month-on-month CPI by approximately -0.07 percentage points.
Year-on-year, the national CPI rose by 1.2%, the same rate of increase as in April. Within this, prices for industrial consumer goods rose by 3.9%, an increase 0.4 percentage points wider than in April, contributing approximately 1.18 percentage points to the year-on-year CPI increase. Service prices rose by 0.8%, a rate 0.1 percentage points lower than in April, contributing about 0.40 percentage points to the year-on-year CPI rise. Food prices fell by 1.7%, with the rate of decline widening by 0.1 percentage points compared to April, dragging down the year-on-year CPI by approximately 0.30 percentage points.
A senior research fellow at the National Institution for Finance & Development noted that the May data indicates the impact of imported factors on domestic prices has significantly weakened. The momentum for international oil price surges has slowed, prices for some metals have corrected, and global grain price fluctuations have stabilized, meaning external cost pressures are no longer a persistent upward force. Simultaneously, domestic food prices remain in a phase of ample supply, with seasonal declines in pork and fresh vegetable prices exerting a dampening effect on the CPI. Among non-food items, the post-holiday retreat in service demand has also moderated short-term price increases.
Month-on-month, the national PPI rose by 0.5%, with the rate of increase 1.2 percentage points lower than in April. Year-on-year, the national PPI increased by 3.9%, with the growth rate expanding by 1.1 percentage points compared to April.
The main characteristics of the month-on-month PPI movement in May were, first, that industrial structure optimization and upgrading drove price increases in some sectors. The ongoing advancement of equipment renewal in manufacturing led to a 1.2% month-on-month price increase in ferrous metal smelting and rolling processing. Accelerating electrification, the deep integration of artificial intelligence across various fields, and growing demand for computing power drove price increases in non-ferrous metals, electrical machinery, and computer-related industries. Second, seasonal demand increases led to price rises in some sectors. Preparations for peak summer electricity demand and increased coal demand for non-power uses pushed the coal mining and washing industry's prices up by 3.2% month-on-month. As temperatures gradually rose entering May, prices for household air conditioner manufacturing and household refrigeration appliance manufacturing increased by 0.9% and 0.3% respectively, while power supply prices rose by 0.4%. Third, fluctuations in international crude oil prices transmitted to affect domestic related industry prices, causing them to shift from increases to decreases or experience slower growth.
Looking ahead, the economist from Minsheng Bank anticipates that PPI momentum is expected to show an upward trend. On one hand, as geopolitical tensions in the Middle East ease, imported inflationary pressures are gradually subsiding. On the other hand, policies addressing 'internal competition' continue to advance, strictly controlling the deployment of inefficient capacity, promoting capacity optimization in high-energy-consuming industries, and gradually improving capacity utilization rates, which will support industrial product prices. However, as end-demand remains relatively weak, price increases for midstream and downstream products are limited, restraining the upside for PPI growth.
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