China's National Bureau of Statistics released data on September 10th showing that in August, the national Consumer Price Index (CPI) remained flat month-on-month and declined 0.4% year-on-year, while core CPI excluding food and energy prices rose 0.9% year-on-year. What insights can we glean from the latest inflation data?
First, core CPI continues to recover. Statistical data shows that August core CPI excluding food and energy prices rose 0.9% year-on-year, with the increase expanding by 0.1 percentage points compared to the previous month. "As policies to expand domestic demand and promote consumption continue to show results, core CPI year-on-year growth has expanded for the fourth consecutive month," said Dong Lijuan, chief statistician of the National Bureau of Statistics' Urban Survey Division. Beyond the expanding core CPI growth, industrial consumer goods prices excluding energy expanded by 0.3 percentage points more than the previous month, while service prices have gradually expanded since March, rising 0.6% in August.
Recently, both central and local governments have intensively launched a series of consumption-promoting policy measures. The Ministry of Finance and other departments released two interest subsidy policies to boost consumption through coordinated efforts on both supply and demand sides. Jiangsu organized over 1,800 related activities around the "Su Super" events, distributing over 140 million yuan in consumer vouchers. Zhejiang focused on key areas such as cultural tourism, sports events, and nighttime economy to fully activate summer consumption.
"Since the beginning of this year, various regions and departments have taken multiple measures to boost consumption from the perspectives of improving consumption capacity, innovating high-quality supply, and optimizing consumption environment. These coordinated policies have promoted continued improvement in supply-demand structure, providing support for related industry prices," said Xu Guangjian, Vice President of the China Price Association.
Although core CPI excluding food and energy prices continues to recover, comparing with previous month's data reveals that August CPI year-on-year changed "from flat to declining." What's behind this?
"This is mainly due to higher comparison base from the same period last year, combined with food price increases being lower than seasonal levels this month," Dong Lijuan explained. From a carryover perspective, the carryover effect of last year's price changes on this month's CPI year-on-year was approximately -0.9 percentage points, with the downward pull expanding by 0.4 percentage points compared to the previous month. From new price increases, this month's CPI remained flat month-on-month, about 0.3 percentage points lower than seasonal levels. These two factors jointly led to lower CPI year-on-year.
"From specific categories, it's mainly due to relatively low food prices," further analyzed Liu Fang, a researcher at the Market and Price Research Institute of China Academy of Macroeconomic Research. In August, food supply was abundant, with pork, eggs, and fresh fruit price changes all weaker than seasonal patterns. Food prices declined 4.3% year-on-year, with the downward pull on CPI year-on-year increasing by about 0.51 percentage points compared to the previous month, higher than the CPI year-on-year decline.
Notably, as domestic market competition order continues to optimize and supply-demand relationships in some industries improve, the Producer Price Index (PPI), which has leading indicator significance, showed positive changes with narrowing year-on-year declines and month-on-month ending eight consecutive months of decline.
Regarding PPI's month-on-month changes, Dong Lijuan analyzed: "Improved supply-demand relationships affected some energy and raw material industry prices to shift from decline to increase month-on-month. Coal processing prices shifted from a 4.7% decline last month to a 9.7% increase, while glass manufacturing prices and electricity and heat production and supply industry prices also shifted from decline to increase."
From a year-on-year perspective, PPI declined 2.9%, with the decline narrowing by 0.7 percentage points compared to the previous month, marking the first narrowing since March this year. Experts analyze that besides the influence of lower comparison base from the same period last year, China's accelerated implementation of more proactive macroeconomic policies has driven positive changes in some industry prices.
"Anti-involution" measures promote narrowing price declines in related industries. Dong Lijuan introduced that as national unified market construction advances deeply, disorderly enterprise competition has been addressed, and capacity management in key industries has been conducted in an orderly manner, leading to narrowing year-on-year price declines in related industries. In August, coal processing, photovoltaic equipment and components manufacturing, and new energy vehicle manufacturing prices all saw narrowing year-on-year declines compared to the previous month.
"New momentum" growth drives positive price changes. Currently, emerging industries are growing robustly, technological innovation and industrial innovation are deeply integrated, and green development is improving quality and efficiency, with related industry prices showing year-on-year recovery. Data shows that in August, integrated circuit packaging and testing series prices rose 1.1% year-on-year; electronic specialty materials manufacturing and intelligent unmanned aircraft manufacturing prices shifted from decline to flat compared to the previous month; waste resource comprehensive utilization industry price declines narrowed by 5.4 percentage points.
Quality-focused consumption drives price increases in some industries. Increased demand for upgraded consumption has driven year-on-year price increases in some industries. In August, arts and crafts and ceremonial goods manufacturing prices rose 13.0% year-on-year, sports ball manufacturing prices rose 4.7%, while nutrition food manufacturing prices and specialized sports equipment and accessories manufacturing prices also increased.
"As various policies to promote consumption and stabilize investment take effect, and national unified market construction advances deeply, domestic demand potential is expected to be further released, supporting price trends in related industries," Liu Fang said.