Data from the National Bureau of Statistics shows that in August, influenced by fluctuations in international market prices and seasonal increases in food prices, the Consumer Price Index (CPI) turned positive on a month-on-month basis, with the year-on-year increase modestly accelerating. On a monthly comparison, the national CPI shifted from a 0.1% decline in the previous month to a 0.4% rise. Due to international market price movements, domestic gasoline prices swung from a 10.7% drop last month to a 7.2% increase this month. Driven by rapid growth in computing power demand, prices for mobile phones, tablets, and data storage devices rose by 2.3%, 2.1%, and 2.1%, respectively. Food prices turned positive, rising 0.4% after remaining flat in the prior month. Service prices increased 0.1%, with the rate of increase narrowing by 0.3 percentage points from the previous month, as travel-related service prices continued to climb during the summer holiday period.

On a year-on-year basis, the national CPI rose 0.8%, expanding by 0.3 percentage points from the previous month, primarily due to a broader increase in energy prices. Energy price gains widened from 0.6% last month to 4.1% this month, contributing approximately 0.28 percentage points to the year-on-year CPI increase, adding about 0.24 percentage points more upward pressure than the previous month. “Overall, CPI performance reflects a pattern where food acts as a drag while industrial consumer goods and services provide support, though the drag from food prices is weakening, and consumer prices continue to show moderate growth,” said Pang Ming, a member of the China Chief Economist Forum. Feng Lin, Executive Director of the Research and Development Department at Eastern Goldstone, believes that in August, escalating tensions in the Middle East drove international oil prices higher again, pushing domestic gasoline prices up significantly. This was the primary reason for the CPI turning positive month-on-month and the expanding year-on-year increase. Additionally, the global AI investment boom has driven chip prices sharply higher, lifting domestic prices for computers, mobile phones, and other electronic products, which also contributed to pushing up the overall price level.

In August, the Producer Price Index (PPI) rose 0.4% month-on-month, compared with a 0.7% decline in the previous month. Dong Lijuan, Chief Statistician of the Urban Department at the National Bureau of Statistics, attributed this mainly to three factors. First, rising international crude oil and non-ferrous metal prices drove up prices in related domestic industries. Second, industrial transformation and upgrading boosted demand and raised prices in certain sectors. Third, price trends in some industries exhibited seasonal characteristics. On a year-on-year basis, the national PPI rose 3.8%, expanding by 0.3 percentage points from the previous month. Among industries with rising prices, coal mining and washing increased 26.6%, smelting and rolling of non-ferrous metals rose 20.8%, while oil and natural gas extraction, petroleum, coal and other fuel processing, and chemical raw materials and chemical products manufacturing increased 10.5%, 11.1%, and 9.1%, respectively. The six industries with the greatest downward pull on prices were electricity and heat production and supply, automobile manufacturing, non-metallic mineral products, pharmaceutical manufacturing, alcohol, beverage and refined tea manufacturing, and agricultural and sideline food processing, with declines ranging from 1.7% to 5.3%.

Pang Ming noted that the sustained growth in both CPI and PPI in August reflects a two-way recovery in consumer and industrial prices, creating a favorable pricing environment for macroeconomic policy to maintain reasonably ample liquidity and strengthen counter-cyclical adjustments. Going forward, policy should continue to focus on smoothing the economic cycle, boosting income and profit expectations for micro-entities, continuously expanding the potential of service consumption, stabilizing food prices, and promoting the sustainability of improved industrial profitability. Wen Bin, Chief Economist at China Minsheng Bank, believes that August price performance met market expectations, characterized by moderate increases and structural divergence. For CPI, energy was the main driver, as international oil price gains fueled a sharp rebound in fuel prices; food prices rose but below seasonal norms; service prices improved moderately with summer travel-related prices rising seasonally, while rents, housekeeping, education, and medical services remained weak. For PPI, producer goods prices were the clear driver, with imported inflation combined with peak summer energy demand pushing up related industry prices, while industrial transformation and upgrading lifted prices in high-end manufacturing and new-growth sectors; however, traditional downstream consumer goods prices improved more slowly, maintaining a pattern of profit divergence between upstream and downstream sectors.

“Looking ahead to the next stage, China’s price levels are likely to continue a structural recovery,” Wen Bin said. For CPI, the pig cycle is bottoming out and stabilizing, with its drag on CPI gradually diminishing. Combined with consumption demand unleashed during the Mid-Autumn Festival and National Day holiday seasons, the core CPI has a foundation for upward repair. For PPI, the third quarter is likely to be the year’s relative high point for year-on-year increases, with fluctuations in international crude oil and non-ferrous metal commodity prices creating periodic external disturbances. AI industry development and green transformation drive structural demand support for high-end manufacturing and new materials. However, with slower recovery in mid-to-downstream demand and a rising base, the year-on-year PPI increase may moderately ease in the fourth quarter, showing an overall trajectory that is “stronger early in the year and stabilizing later in the year.”