On August 4th, multiple industry insiders surveyed provided forward-looking analysis on the trends of the July Consumer Price Index (CPI) and Producer Price Index (PPI). These experts generally anticipate that the year-on-year growth rates for both CPI and PPI will decelerate in July.
Looking at the CPI, the June reading showed a 1.0% year-on-year increase. Wen Bin, Chief Economist at China Minsheng Bank, forecasts a slight moderation to 0.7% year-on-year for July. He notes that the average wholesale price index for agricultural products stood at 111.7 points in July, down 1.0% month-on-month. Analyzing the components, due to a concentrated supply of summer seasonal fruits, fruit prices fell 5.7% month-on-month. Vegetable prices declined 0.2% month-on-month, a result of both ample summer vegetable supply and temporary disruptions from adverse weather. Egg prices dropped 5.0% month-on-month, linked to sluggish summer consumption and cautious restocking by traders at high prices. Conversely, pork prices rose 6.3% month-on-month, driven by supply-side structural changes, market bullish sentiment, and heavy rainfall disrupting live pig logistics. Additionally, energy prices fell in July, with domestic refined oil product average prices posting a narrower 6.2% year-on-year increase due to a significant early-month adjustment and limited mid-month recovery.
Wen Bin further explains that July saw the emergence of a summer consumption effect, boosting demand and prices in related service sectors. Driven by rental demand from the graduation season, the average rent in 50 cities rose 0.13% month-on-month, accelerating from June. However, clothing prices likely fell month-on-month, as summer apparel demand saturated and merchants cleared inventory through discounts, while autumn and winter collections had not yet fully launched. Sun Binbin, Chief Economist at Caitong Securities, suggests that in July, average pork prices rose, fresh vegetable prices were largely stable, domestic oil prices saw significant downward adjustments before an upward revision, and Shanghai gold prices continued to fall, leading to an expected moderation in the CPI year-on-year increase. Looking ahead, signs of stabilization are emerging for pork prices, though a trend-based rebound awaits actual supply-demand improvements. Vegetable prices are expected to rise seasonally, while domestic oil prices may oscillate lower, suggesting CPI year-on-year fluctuations in August and September.
Regarding the PPI, which grew 4.1% year-on-year in June, Sun Binbin predicts a 3.7% year-on-year increase for July. Wen Bin expects a 0.5% month-on-month decline and a 3.8% year-on-year rise. A research report from CICC (China International Capital Corporation) analyzes that the PPI year-on-year increase may fall to around 3.9% in July. Wen Bin notes that the July purchasing price index for major raw materials and the factory gate price index were 53.2% and 47.8%, respectively, down 1.0 and 0.4 percentage points from June. The factory gate price index has been below the expansion-contraction threshold for two consecutive months, and the growth in raw material purchase prices is narrowing, sustaining a pattern of divergence between upstream and downstream sectors. Specifically, international oil price increases are fueling inflation expectation rebounds, intensifying expectations for Federal Reserve tightening, which has pushed up the US dollar and Treasury yields. This increases the holding cost of precious metals, suppressing investment demand, with gold and silver down 3.9% and 11% month-on-month, respectively. Among industrial metals, copper and aluminum prices saw modest declines. Domestically, commodity prices continued their June decline, with the monthly average of the Nanhua Industrial Commodity Index falling 4% month-on-month. The metals index average fell 2.3% month-on-month, and the precious metals index dropped 6.7%. The energy and chemicals index average fell 4.6% month-on-month, as crude oil price gains failed to transmit to midstream and downstream chemical products. Construction materials like rebar, cement, and glass saw month-on-month price declines, with aluminum falling sharply and copper declining slightly. Wen Bin adds that the average month-on-month decline in the Ministry of Commerce's weekly statistics for production materials prices was 1.1%, the first month-on-month drop since October last year. Based on PMI indicators and high-frequency data, he estimates a slight month-on-month PPI decline in July, with a 3.8% year-on-year increase, slightly lower than June's 4.1%.
Sun Binbin states that looking ahead, oil prices have started to decline from their recent peak since late July, and he projects PPI year-on-year growth of 3.0% and 2.5% for August and September, respectively.
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