September saw marginal improvement in domestic demand, with external demand and new growth drivers resonating together, while counter-cyclical adjustment effects accelerated.
On the supply side, production growth continued to rise, high-tech manufacturing and modern services maintained strong momentum, and the PMI returned to expansion territory. On the demand side, exports surged beyond expectations, retail sales edged up marginally while above-scale retail remained negative, investment decline held steady with month-on-month turning positive for the first time this year, showing early signs of bottoming out. On prices, CPI rose moderately and PPI hit a near two-year high, but the widening scissors gap between upstream and downstream squeezed midstream and downstream costs. On the financial front, liquidity was ample while endogenous financing demand remained weak, with financing structure shifting significantly toward direct financing.
Overall, third-quarter GDP grew 4.5%, with the economy bottoming out and recovering mildly, yet the quality of improvement was mainly externally driven. Insufficient domestic demand remains the core constraint, and incremental policies need to be implemented effectively. Looking ahead to the fourth quarter, the economy is expected to continue recovering but with limited momentum, with GDP growth forecast at around 4.6% and full-year growth at approximately 4.6%.
Both Supply and Demand Sides Improved Simultaneously, but Stabilization Momentum Still Needs Consolidation
September economic supply and demand indicators mostly improved, with high export growth and accelerating production as the main drivers, while consumption and investment recovery slopes remained mild and domestic demand momentum still needed strengthening.
On the production side, industrial value-added rose for the second consecutive month, with upstream energy as the primary marginal improvement force; new growth driver增速 slowed slightly from high levels. Service sector production growth rebounded at quarter-end, with both producer services and distribution services contributing, though sustainability remains to be observed.
On the demand side, consumption rebounded mildly, mainly due to the Mid-Autumn Festival holiday shifting effect that pulled forward spending across most categories, while large-ticket consumption such as automobiles deepened its drag; the "GDP-employment-income-consumption" transmission chain remained blocked, still constraining the height of consumption recovery. Investment decline narrowed in the month, showing early stabilization signals. Among them, manufacturing investment saw the largest narrowing, mainly due to strong exports and intensified policy support; infrastructure investment decline narrowed somewhat, with fiscal intensification and new infrastructure as core support, while traditional infrastructure continued negative growth; real estate investment decline continued to expand, with the bottoming pattern of "weak sales, inventory destocking pressure, weak land acquisition, tightening financing" unchanged. Exports continued high growth, with the AI chain and high-end manufacturing as core pulling forces, among which price increases in AI-related products had a prominent boosting effect on exports.
Inflation: CPI Rose Moderately, PPI Surged Beyond Expectations
September CPI rose moderately, mainly due to energy price increases, but core CPI was flat from the previous month, structurally characterized by "services and gold weakening, communications and healthcare strengthening," indicating residents' endogenous purchasing power remained weak. PPI rose beyond expectations year-on-year, with month-on-month again above 1%, as the crude oil and non-ferrous metals chain was the main driving force, with coal and AI chain price increases also providing support. Looking ahead, geopolitical tensions may cause PPI to fluctuate at high levels, but insufficient domestic demand remains a strong constraint, with October CPI and PPI forecast to grow approximately 0.8% and 6.0% respectively.
Finance: Social Financing and Credit Slightly Better Than Expected, RRR and Rate Cuts May Be Delayed
September fiscal front-loading supported social financing and credit new additions slightly better than expected, but both growth rates continued to decline, credit structure improvement was limited, and the degree of fund activation decreased. The problems of insufficient effective demand in the real economy and weak expectations still need improvement.
First, government bonds supported social financing better than expected, and social financing growth is expected to gradually bottom out and stabilize in the fourth quarter. Second, total credit growth continued to slow, with the household sector remaining weak structurally, while corporate medium-to-long-term loans showed early signs of recovery. Third, M1 and M2 growth rates fell beyond expectations, and the degree of fund activation declined. Looking ahead, fiscal and monetary authorities have recently coordinated to introduce a package of stable growth policies, and the central bank is expected to focus on observing policy effects in the short term, with emphasis on maintaining ample and accommodative liquidity, while RRR and rate cuts may be delayed.
Domestic Demand Improved Marginally, External Demand Resonated with New Growth Drivers, Counter-Cyclical Adjustment Effects Accelerated
This month's data presented a differentiated pattern of "stronger external demand, marginal domestic demand improvement; accelerating production, still-weak consumption; high prosperity in new growth drivers, pressure on traditional drivers." Compared with last month, most indicators improved simultaneously in September. Third-quarter GDP grew 4.5%, up 0.2 percentage points from the second quarter, and both manufacturing and non-manufacturing sentiment indices returned to expansion territory. However, the quality of this round of improvement was still mainly driven by external forces and price factors. Investment remained in deep negative growth territory, above-scale commodity retail had not yet turned positive, household credit continued to contract, and endogenous recovery momentum was limited.
The current core contradiction lies in insufficient domestic demand and the unchanged pattern of strong supply and weak demand. Poor price transmission along the upstream and downstream chain intensified cost pressures on midstream and downstream enterprises. Expanding domestic demand and stabilizing growth still require intensified policy support, with the key being effective implementation of incremental policies.
On the supply side, production growth continued to rise, and the transformation of old and new growth drivers continued to accelerate. September above-scale industrial value-added grew 5.5% year-on-year, 0.3 percentage points faster than last month, with structural highlights standing out. Industrial new growth drivers represented by high-tech manufacturing remained the core support for stabilizing production. The service sector also recovered simultaneously, with September service production index growing 4.8% year-on-year, and modern services such as information transmission software and leasing and business services continuing to lead growth. Manufacturing PMI rebounded to 50.1%, and the service sector business activity index rose to 50.2%, both returning to expansion territory.
By structure, the high-end manufacturing chain's prosperity was independent of traditional cycles, with electronic equipment and special-purpose equipment maintaining double-digit growth, while traditional high-energy-consuming industries such as coal mining and non-ferrous smelting remained under pressure. The main line of industrial upgrading had strong certainty, but the "temperature gap" between old and new growth drivers remained significant.
On the demand side, the pattern of external demand stronger than domestic demand and service consumption stronger than goods consumption continued, with domestic demand stabilizing marginally. September exports (in USD terms) grew 36.3% year-on-year, 11.4 percentage points faster than last month, with the AI industry chain and high-end manufacturing still the core driving forces, and labor-intensive product exports also generally recovering. However, the quality content needs cautious assessment: integrated circuit export value doubled while volume grew almost zero, with the boost to domestic production and employment weaker than apparent.
In contrast, domestic demand recovery was slower, with September retail sales growth rebounding to 1.1%, mainly driven by the Mid-Autumn Festival shift and low base effects, while automobiles remained the largest drag. Above-scale consumer goods retail fell 2.1%, and service retail continued to grow faster than goods retail. At the investment level, January-September fixed asset investment fell 7.2%, with the decline flat from last month, and September month-on-month turned positive for the first time this year. Infrastructure, real estate, and manufacturing investment year-on-year declines narrowed, showing early signs of bottoming; structurally, "new investment" was clearly stronger than "old investment."
On prices, CPI rose moderately, PPI growth expanded significantly, and the upstream-downstream price "scissors gap" widened. September CPI rose 0.9% year-on-year, and core CPI rose 1.0%. The driving forces were: first, energy transmission from Middle East tensions pushing up oil prices; second, AI-driven chip and related terminal price increases; and third, falling food prices continued to be a drag. PPI rose 5.0% year-on-year, hitting a new high since July 2022, driven by imported effects from international commodities and oil freight rates, supply clearing in the midstream and downstream of the petrochemical chain, and new demand from computing-power coordination. However, the PPI-CPI scissors gap has widened to 4.1 percentage points, with price transmission diminishing progressively along the industrial chain. Midstream and downstream manufacturing faced cost squeezes, and this round of rebound had prominent imported and structural characteristics with insufficient endogenous pricing power. In the next stage, attention should be paid to imported uncertainty under geopolitical disturbances, with October CPI and PPI forecast to grow 0.8% and 6.0% respectively.
On money and credit, liquidity was reasonably ample, credit "slowed in volume while improving in quality," and financing structure underwent significant transformation. At end-September, social financing stock grew 7.1% year-on-year, and M2 grew 7.2% year-on-year. Although slightly slower, both remained above the third-quarter nominal GDP growth of 6.0%. Insufficient loan demand remained prominent, with September new RMB loans declining year-on-year. Corporate medium-to-long-term loans served as the main force, while household credit continued to contract, reflecting that the economy is in a painful period of old-new growth driver transformation. New social financing resumed year-on-year growth but was mainly driven by government bonds, with limited improvement in endogenous financing demand.
By structure, the financing system is accelerating its shift toward direct financing. From January to September, bond and equity financing accounted for nearly 50% of social financing increments, significantly exceeding the loan share. Since end-September, a new round of incremental policies has been accelerating implementation, with monetary policy focus shifting to structural tools and fiscal coordination to escort fiscal efforts. Under rising prices, compressed interest margins, and stabilizing economy, the probability of a comprehensive rate cut within the year is low.
Looking ahead to the remainder of the year, the economy has bottomed out and recovered moderately in the third quarter, and is expected to continue recovering in the fourth quarter but with limited momentum. Rising prices drove the GDP deflator positive for two consecutive quarters, and the corporate profit environment improved marginally. On the policy front, pragmatic and effective incremental policies are expected to gradually take effect: on the fiscal side, the remaining quota and new financial instruments are accelerating implementation; on the monetary side, liquidity remains accommodative and coordinates with fiscal efforts, focusing on supporting scientific innovation, "six networks" infrastructure, and people's livelihoods, accelerating the pace of using various policy funds to promote investment stabilization.
On the consumption side, supported by "Double 11" promotions and low base effects, growth is expected to continue recovering; exports, benefiting from AI industry chain and high-end manufacturing momentum and fourth-quarter low base effects, are expected to maintain strong resilience. Fourth-quarter GDP growth is forecast at around 4.6%, with full-year growth at approximately 4.6%. Benefiting from rising inflation, nominal GDP growth will be significantly higher than real growth.
Economy: Both Supply and Demand Sides Improved Simultaneously, Stabilization Momentum Still Needs Consolidation
Production: Industry and Services Both Rebounded, Low Base Supports Fourth-Quarter Growth
Industrial production rose for the second consecutive month, with upstream energy as the main marginal improvement force. In the first three quarters, above-scale industrial value-added grew 5.3% year-on-year, 0.6 percentage points higher than GDP growth over the same period, playing a prominent supporting role. In September, it grew 5.5% year-on-year, 0.3 percentage points higher than last month, marking two consecutive months of marginal improvement.
Structurally, three major features emerged: First, upstream energy industries (petroleum chain + coal, etc.) saw the most significant marginal improvement. Benefiting from supply guarantee and reserve increase policies, improved competitiveness, and improving downstream demand, September mining and utilities production and supply value-added growth rates rose 2.7 and 0.7 percentage points respectively from last month, while manufacturing value-added growth edged down slightly from last month.
Second, new growth drivers maintained relatively fast growth but slowed for two consecutive months. Driven by strong exports and robust domestic industrial upgrading demand, in the first three quarters, high-tech manufacturing and equipment manufacturing value-added grew 14.3% and 10.2% respectively, significantly higher than all industry over the same period, remaining important supporting forces, but marginally both had slowed from high levels for two consecutive months.
Third, downstream consumer goods and private industrial production were relatively weak. Affected by still-weak domestic demand, imported price shocks, and weak expectations, most downstream consumer manufacturing production declined, with private enterprise industrial value-added growing only 3.8%. Looking ahead, supported by intensified stable growth policies, sustained high prosperity of new growth drivers, and low base effects, industrial production is expected to maintain relatively high-level operation, with full-year growth of approximately 5.5%.
Service sector production rebounded seasonally, with sustainability to be observed. In September, the service production index grew 4.8% year-on-year, significantly up 0.7 percentage points from last month, with quarter-end seasonal rebound characteristics prominent. By industry: producer services provided important support, with information transmission software and IT services and leasing and business services production indices growing 9.8% and 9.5% respectively, up 0.2 and 0.5 percentage points from last month. Distribution services formed marginal support, with September transportation, warehousing and postal services production index up 0.6 percentage points from last month, and first-three-quarter accommodation and catering and wholesale and retail value-added up 0.5 and 0.7 percentage points from the first half.
The acceleration in these industries may mainly stem from last year's low base and this year's Mid-Autumn Festival holiday shifting effect. Looking ahead, low base effects, high prosperity of the digital economy, and ample fiscal space provide structural support for the service sector, but recovery momentum and sustainability still need to be observed, with the key being whether real estate can stabilize.
Consumption: Marginal Moderate Recovery, Momentum Needs Boosting
From January to September, retail sales grew 1.1% year-on-year, 2.6 percentage points lower than full-year 2025 growth. In September alone, it grew 1.1% year-on-year, 0.7 percentage points higher than last month, with month-on-month growth turning from negative to positive, performing better than market expectations.
Four major features emerged: First, trade-in related categories showed divergence. In September, trade-in categories still dragged retail sales down by 1.6 percentage points, with automobiles dragging retail sales down by 2.3 percentage points, while the other five major trade-in categories increased their support for retail sales from last month. This was related both to recent increased consumption promotion efforts by multiple local governments and to residents' still-insufficient willingness for large-ticket consumption such as automobiles.
Second, the holiday shift effect boosted improvement in certain commodity consumption. Benefiting from the Mid-Autumn Festival shift effect (this year's Mid-Autumn holiday fell in September, and some residents combined Mid-Autumn and National Day holidays, with some consumption released early in September), basic living categories such as tobacco and alcohol, grain, oil and food, and daily necessities saw significantly accelerated growth from last month, while sports and entertainment and gold and silver jewelry consumption also improved marginally.
Third, the consumption structure upgrading trend was evident, with service consumption continuing to lead. From January to September, service retail sales grew 5.0% year-on-year, up 0.1 percentage points from last month, 4 percentage points faster than goods retail growth.
Fourth, consumption willingness urgently needs boosting. Third-quarter per capita consumption expenditure further dropped to 3.5%, at a low level in recent years, with per capita disposable income improving moderately along with nominal GDP, but the marginal propensity to consume continuing to decline, which was the main drag. This reflected that precautionary savings willingness increased rather than decreased, closely related to the blocked "GDP-employment-income-consumption" transmission.
Looking ahead, significantly lower bases for trade-in related categories in the fourth quarter and intensified counter-cyclical policies are expected to provide substantial support for retail sales growth; however, the K-shaped economic divergence pattern persists, and the blocked "GDP-employment-income-consumption" transmission fundamentally suppresses consumption capacity and willingness, so the height of consumption recovery may still be limited. Therefore, the necessity for future policy intensification remains strong, and the focus should systematically shift toward increasing residents' income and expectations, optimizing service supply, and unleashing consumption potential.
Investment: Manufacturing and Infrastructure Declines Narrowed, Early Stabilization Signals Emerged
Investment showed early stabilization signs, with the decline expected to gradually narrow within the year. From January to September, fixed asset investment fell 7.2% year-on-year, with the decline flat from last month; month-on-month growth was 0.07%, returning to positive growth after 6 months, showing some marginal improvement on the investment side. By entity, private investment fell 10.4% year-on-year, with the decline expanding 0.3 percentage points from last month, with the drag on overall investment increasing rather than decreasing. Private enterprise investment willingness urgently needs policy support. State-owned holding investment decline narrowed 0.4 percentage points to -3.2%, reflecting enhanced policy support.
Structurally, the three major categories of investment showed a pattern of "manufacturing and infrastructure declines converging, real estate drag deepening" in monthly growth. In September, manufacturing, infrastructure, and real estate investment monthly growth declines narrowed by 5.1 and 1.5 percentage points and expanded by 0.8 percentage points respectively from August, presenting a pattern of "significant manufacturing improvement, slight infrastructure stabilization, deepening real estate drag." Among them, accelerated deployment of policy-based financial instruments and continued strong exports provided strong support for infrastructure and manufacturing investment; however, structural adjustment pressures during the old-new growth driver transition remained large, and real estate investment may continue bottoming and adjusting in the short term.
In addition, from January to September, high-tech industry investment grew 4.9% year-on-year. Although down 0.3 percentage points from January-August, it was still 12.1 percentage points higher than all investment, with its leading role continuing to stand out. Looking ahead, with accelerated implementation of existing and incremental policies, accelerated construction of "six networks" projects, emerging low base effects, and accelerated cultivation of new growth drivers, the investment decline is expected to gradually narrow within the year. Structurally, infrastructure investment is expected to recover moderately under fiscal efforts and major project support; manufacturing investment structure is expected to continue optimizing, but overall may operate at low levels under K-shaped divergence; real estate investment will likely continue its bottoming and adjustment trend.
Manufacturing investment decline narrowed significantly, with strong exports and intensified policy as core support. From January to September, manufacturing investment fell 2.1% year-on-year, with the decline narrowing 0.2 percentage points from last month; monthly decline was 0.9%, narrowing 5.1 percentage points from last month, showing significant marginal improvement, with continued strong exports and policy support likely being the core support.
Specifically, upstream industries affected by price fluctuations and weak real estate demand saw enterprises becoming more cautious in investment behavior, with non-ferrous metal rolling and chemical raw materials industry investment growth both continuing negative. Midstream industry investment growth mostly rebounded, mainly benefiting from continued strong exports and accelerated deployment of policy-based financial instruments, with computer, communications and electronic equipment, and railway, shipbuilding, aerospace and other transportation equipment manufacturing seeing the most significant rebounds. Downstream industry growth was generally negative, affected by weak resident demand, with textile, food manufacturing, medical manufacturing, and agricultural and sideline food manufacturing investment growth all recording negative growth.
Looking ahead, export resilience, transformation and security needs, and policy support will continue to support manufacturing investment, but affected by repeated external crude oil prices, midstream and downstream profit pressures, and still-weak endogenous momentum from real estate and consumption, manufacturing investment is expected to remain at low levels.
Infrastructure investment decline narrowed marginally, with fiscal efforts and new infrastructure as main support. From January to September, infrastructure investment fell 4.2% year-on-year, with the decline expanding 0.2 percentage points from January-August; monthly decline was 5.4%, narrowing 1.5 percentage points from last month. The marginal narrowing mainly stemmed from accelerated policy implementation: First, special bond issuance accelerated. September new special bond issuance totaled approximately 620.38 billion yuan, up 207.29 billion yuan year-on-year. Second, from September, new policy-based financial instruments accelerated deployment, with investment tilting toward "six networks."
By industry, traditional and new infrastructure continued to diverge. From January to September, aviation transport and information transmission investment grew 13.8% and 30.8% year-on-year respectively, down 2.9 percentage points and up 2.4 percentage points from January-August; electricity, heat, gas and water production and supply, road transport, water conservancy management, and public facilities management investment growth all continued negative, with most investment declines expanding.
Looking ahead, benefiting from accelerated fiscal efforts and concentrated construction of "six networks" projects, fourth-quarter infrastructure investment growth is expected to turn positive from negative, but the old-new growth driver divergence pattern will likely be difficult to reverse, and infrastructure investment may only play a supporting role with limited rebound elasticity.
Real estate investment decline expanded, with sales, funding, and land acquisition weakness unchanged. From January to September, real estate investment fell 20.6% year-on-year, with the decline expanding 0.7 percentage points from January-August. Over the same period, new construction and completed area growth rates expanded by 0.1 and 1.4 percentage points respectively to -24.9% and -25.1%, indicating the real estate chain remains in deep adjustment, with its drag on overall investment further deepening. Looking ahead, real estate market stabilization still needs time, and it will likely continue bottoming and adjusting.
First, sales continued to contract. From January to September, commercial housing sales area fell 13.2% year-on-year, with the decline expanding 1.1 percentage points; commercial housing sales value fell 13.9% year-on-year, with the decline expanding 0.9 percentage points. Second, inventory destocking pressure remained. Commercial housing for-sale area fell 1.5% year-on-year, declining for 7 consecutive months, but due to sales area contraction, the inventory-to-sales ratio rose 0.4 percentage points from last month to 11.7, still at historical highs. Third, housing prices continued to fall. In September, the 70 large and medium-sized city new commercial housing price index month-on-month decline narrowed 0.1 percentage points to -0.1%, and year-on-year decline narrowed 0.3 percentage points to -3.0%. Fourth, leading indicators showed no improvement. From January to September, real estate development funding sources year-on-year decline expanded 0.6 percentage points to -21.6%; September 100 large and medium-sized city transacted land area (TTM) decline expanded 1.1 percentage points from last month to -11.5%, showing that real estate enterprises have seen no signs of bottoming in financing, land acquisition, and sales, indicating that real estate investment is still in the process of finding its bottom, and market stabilization still requires further policy support.
Exports: AI Industry Chain and High-End Manufacturing as Core Drivers, Price Factors Provided Notable Boost
From January to September 2026, imports and exports grew 27.5% and 21.3% respectively, both in the high growth range since 2021, presenting a pattern of "export resilience, stronger imports." In September alone, imports and exports grew 31.0% and 36.3% respectively, maintaining high growth rates.
Export resilience mainly stemmed from three factors: First, export diversification and maintained high growth to major trading partners. September exports to the US grew 39.6%, up 5.2 percentage points from August, continuing the recovery trend since the beginning of the year; exports to ASEAN, BRICS countries, South Korea, the EU, and Africa also grew strongly, at 52.3%, 42.3%, 68.2%, 25.3%, and 24.7% respectively.
Second, export structure continued to optimize, with the AI industry chain and high-end manufacturing as core drivers. September mechanical and electrical products accounted for 66.7%, growing 43.7%; driven by rapid AI industry development and continued global expansion of computing power, data center, and terminal device demand, related product exports were boosted, with integrated circuits, automatic data processing equipment, high-tech products, and automobiles growing 136.0%, 92.9%, 63.6%, and 62.0% respectively, with export price increases having a prominent boosting effect on export growth, especially the export boost from price increases in AI industry chain related products such as integrated circuits and automatic data processing equipment.
Third, the global manufacturing PMI continued to stabilize in the high prosperity range of 53.0%, with US and EU manufacturing PMIs also above 52%, providing strong support for exports from external demand resilience. Fourth, mainly supported by quarter-end concentrated deliveries, overseas Christmas order front-loading, restocking demand, and emerging market volume expansion.
Looking ahead to the fourth quarter, this trend will continue, with full-year export growth expected to reach approximately 18%-20%. First, AI industry chain and high-end manufacturing exports will continue high growth. The latter's high export growth stems from domestic industrial competitiveness, while the former mainly benefits from the global AI revolution and resulting trade growth. China is deeply embedded in the Asian semiconductor supply chain that accounts for 62% of global AI trade, and is expected to continue sharing in industry dividends.
Second, the role of export market diversification will upgrade from "incremental engine" to "systematic shock absorber," determining the lower bound of fourth-quarter export growth. According to the General Administration of Customs, in the first half, China's imports and exports of intermediate goods to ASEAN reached 2.86 trillion yuan, growing 24.5%, accounting for two-thirds of bilateral trade value, showing that exports to ASEAN have shifted from terminal consumer goods to upstream supply embedded in local industrialization processes; such orders are driven by multi-year industrial investment, with significantly stronger stickiness than consumer goods, and even if individual developed market trade policies cause marginal disturbances in the fourth quarter, they will hardly shake the overall export picture.
Third, external demand resilience continues. Global manufacturing PMI remains in expansion, with the external demand support surface broadening from the AI chain to broader manufacturing. Combining these logics, full-year export growth of approximately 18%-20% is achievable. Main downside risks lie in continued Middle East geopolitical conflicts disrupting global trade slowdown, rising US and EU monetary policy tightening expectations suppressing external demand, and trade friction and anti-circumvention investigation escalation eroding diversification buffers. If any materializes substantially, the full-year reading faces downward revision. Additionally, China's AI industry chain export high growth mainly relies on price increase effects, with export volumes not maintaining同步 growth, also bringing significant uncertainty to exports.
Inflation: CPI Rose Moderately, PPI Surged Beyond Expectations
CPI: Supported by energy and structural price increases, endogenous momentum needs boosting. September CPI year-on-year growth expanded 0.1 percentage points to 0.9%, mainly due to energy price increases, which raised the CPI year-on-year pull by approximately 0.22 percentage points; however, core CPI year-on-year was flat from last month at 1.0%, and food prices month-on-month were 0.8 percentage points below the average of the same period over the past 10 years, indicating residents' endogenous purchasing power remained weak.
Within core CPI, a structural divergence of "services and gold weakening, communications and healthcare strengthening" emerged: First, service prices month-on-month turned negative at 0.2%, 0.3 percentage points below the average of the same period over the past 10 years, but medical service prices month-on-month growth remained non-negative since February 2025, mainly supported by policy-based price adjustments; Second, gold jewelry price growth fell 11.1 percentage points, weakening its support for CPI year-on-year; Third, durable goods continued the divergence of "communications rising, home appliances and automobiles falling," with the former driven by the storage chip price increase cycle, and the latter reflecting terminal competitive price reduction pressure and fading trade-in policy base effects.
Overall, CPI recovery mainly relied on external support such as energy and structural price adjustments, with consumption's endogenous price repair momentum still needing consolidation.
PPI: Imported factors were the main reason for the beyond-expectations surge. September PPI rose 5.0% year-on-year, up 1.2 percentage points from last month; month-on-month rose 1.2%, up 0.8 percentage points from last month, with imported factors such as crude oil and non-ferrous metals as the main driving force, while coal and AI chain price increases also provided support.
First, imported factors contributed nearly 60% of the PPI month-on-month increase. The crude oil petrochemical chain and non-ferrous metals chain affected PPI month-on-month increases of 0.59 and 0.11 percentage points respectively, up 0.41 and 0.06 percentage points from last month, as the main forces behind the significant month-on-month rise. Second, the coal chain's contribution to PPI month-on-month increased marginally by 0.2 percentage points. Affected by factors such as tight supply and international coal price increase expectations, the coal mining industry PPI rose 9.5% month-on-month; combined with fiscal intensification expectations, non-metallic minerals and ferrous smelting and rolling industries saw prices turn from decline to rise, jointly driving the coal chain's contribution higher. Third, new growth drivers continued to play a supporting role. The AI industry chain (electrical machinery, computer communications) pulled PPI month-on-month up 0.07 percentage points, maintaining positive growth for 12 consecutive months.
Overall, September CPI rose moderately, PPI surged beyond expectations, and the scissors gap between them expanded to a historical high range, reflecting the structural divergence of "external cost increases, weak internal demand." Looking ahead, on one hand, affected by repeated geopolitical conflicts, crude oil and other commodity prices face fluctuation risks, and fourth-quarter imported inflation pressure remains, with PPI possibly fluctuating at high levels; on the other hand, under the old-new growth driver transition, the domestic "growth-employment-income-consumption" cycle remains blocked, and CPI will likely continue moderate increases. October CPI and PPI year-on-year are forecast to grow approximately 0.8% and 6.0% respectively.
Finance: Social Financing and Credit Slightly Better Than Expected, RRR and Rate Cuts May Be Delayed
September fiscal front-loading supported social financing and credit new additions better than expected, but both growth rates continued to decline. Structurally, household sector credit remained weak and corporate short-term and medium-to-long-term loans declined year-on-year. M1 and M2 growth rates fell beyond expectations, and the degree of fund activation decreased. The problems of insufficient effective demand in the real economy and weak expectations still need improvement.
Specifically: Social financing: Government bonds formed the main support, and growth is expected to gradually bottom out and stabilize. September new social financing was 3.55 trillion yuan, up 19.2 billion yuan year-on-year, better than market expectations of 3.13 trillion yuan; social financing stock growth was 7.1%, down 0.1 percentage points from last month. Real economy credit expansion remained weak but slightly better than market expectations.
By structure: First, accelerated government bond issuance was the main support, with new additions exceeding 1.5 trillion yuan this month, up 343.8 billion yuan year-on-year and approximately 500 billion yuan more than last month. Second, credit continued to be an important drag, with new RMB loans (social financing caliber) at 1.27 trillion yuan, down 334.2 billion yuan year-on-year, and the January-September cumulative value as a proportion of new social financing falling to 41.9%, 6.4 percentage points lower than the same period last year. Third, corporate bonds contracted beyond expectations, with corporate bond net financing at -42.5 billion yuan this month, down 56.1 billion yuan year-on-year, with urban investment bond net financing of approximately -100 billion yuan as one of the main drags, while this year's front-loaded corporate bond issuance also formed a certain drag. Fourth, off-balance-sheet financing continued to contract, down 40.2 billion yuan year-on-year this month, with undiscounted bankers' acceptances, trust loans, and entrusted loans down 108.1 billion, 54.0 billion, and up 51.9 billion yuan respectively year-on-year. The former two weakened mainly due to insufficient real economy demand, while the increase in entrusted loans may be related to increased supporting financing demand from accelerated deployment of policy-based financial instruments.
Looking ahead, according to this year's Two Sessions targets and the revitalized 550 billion yuan local debt quota balance, fourth-quarter government bond year-on-year increases will still exceed one trillion yuan. Combined with the boost to related financing demand from broad fiscal expansion and low base effects, social financing growth is expected to gradually bottom out and stabilize, but sustained recovery depends on 2027 fiscal expansion.
Credit: Household sector remained weak, corporate medium-to-long-term loans showed early recovery. September new RMB loans were 1.08 trillion yuan, down 210 billion yuan year-on-year; credit growth fell to 4.8%, continuing to hit historical lows. By structure, the household sector remained the main drag, with low base supporting corporate bill financing year-on-year increases.
First, household sector financing remained sluggish. September household new short-term and medium-to-long-term loans were -90 billion and 87.4 billion yuan respectively, down 232.1 billion and 182.6 billion yuan year-on-year (consistent with weak consumption and expanding real estate sales declines over the same period, with September 30 large and medium-sized city commercial housing sales area growth dropping from -6.3% to -10.8%). From January to September cumulative, household sector new loans were approximately -1 trillion yuan, with their proportion of new loans dropping from a peak of nearly 50% to -8.9%. Under multiple constraints such as unstable employment expectations and high debt pressure, household deleveraging accelerated, and household balance sheet repair remains a long and arduous task.
Second, corporate medium-to-long-term loan year-on-year decline narrowed. September enterprise and public institution new short-term and medium-to-long-term loans were 460 billion and 890 billion yuan respectively, down 250 billion and 20 billion yuan year-on-year, with the medium-to-long-term loan decline narrowing significantly. Support may stem from accelerated deployment of policy-based financial instruments providing some leverage for related financing demand, while existing and incremental policies intensified, manufacturing PMI rebounded above the 50% boom-or-bust line, and infrastructure and other financing demand recovered moderately. However, September PSL continued net decreases, and the boost to credit demand from fiscal and quasi-fiscal support is still at an early stage, with subsequent effects still to be observed.
Third, bill financing and non-bank loans formed some support. September bill financing and non-bank financial institution loans were -50 billion and -148.5 billion yuan respectively, but benefiting from low base support, their year-on-year declines narrowed by 352.6 billion and 86.3 billion yuan respectively.
Money: M1 and M2 growth rates fell beyond expectations, and the degree of fund activation decreased. M1: September growth was 3.2%, down 0.9 percentage points from last month, significantly below market expectations of 3.9%. By component, household demand deposits and unit demand deposits growth fell 1.8 and 0.6 percentage points respectively from last month, as the main drags. This reflected both the slowdown in household and enterprise sector income and financing growth, and the decline in market risk appetite and fund activation degree. M2: September growth was 7.2%, still down 0.3 percentage points from last month despite a significantly lower base, with weak loan-derived credit and smaller fiscal deposit year-on-year declines as the main drags.
Deposit structure: New household deposits and non-bank deposits were 1.77 trillion and -1.91 trillion yuan respectively, down 440 billion and 850 billion yuan year-on-year. The simultaneous decline in both stemmed partly from capital market adjustments causing residents to reduce risky asset allocation, and partly reflected signs of residents again increasing safe asset allocation such as time deposits.
Looking ahead, facing prominent problems such as weak private sector leverage willingness and insufficient domestic demand, fiscal and monetary authorities have coordinated to introduce a package of stable growth policies since end-September. The central bank at the Financial Street Forum previewed the timely promotion of policy rate anchor switching (from 7-day reverse repo rate to overnight reverse repo rate), which to some extent helps lower the market interest rate center. In the short term, monetary policy will focus on observing policy effects, with emphasis on maintaining ample and accommodative liquidity, while RRR and rate cuts may be delayed. However, with weak endogenous momentum recovery, aggregate easing may still not be absent.
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