Resident consumption demand steadily rebounds base | year-on-year | demand

According to data from the National Bureau of Statistics, the national consumer price index rose by 0.2% month on month in July this year, transitioning from a decline to an increase; Compared to the previous month, it remained unchanged and decreased by 0.3%. The ex factory price index of industrial producers has narrowed both month on month and year-on-year.

Dong Lijuan, Chief Statistician of the Urban Department of the National Bureau of Statistics, said that overall, the year-on-year decline in CPI is a phased trend. In the next stage, as the economy recovers and market demand steadily expands, the supply-demand relationship continues to improve, and the high base impact of the same period last year is gradually eliminated, CPI is expected to gradually rebound.

In July, consumer demand among residents continued to recover, with CPI turning from a decrease to an increase on a month on month basis. However, due to the high base in the same period last year, there was a slight decline year-on-year. From a month on month perspective, the CPI has shifted from a 0.2% decrease in the previous month to an increase of 0.2%, marking the first time in nearly 6 months that it has turned positive; The core CPI rose by 0.5%, an increase of 0.6 percentage points from the previous month. Among them, due to factors such as strong summer tourism consumption, prices of air tickets, tourism, hotel accommodations, etc. have increased to varying degrees, driving an overall increase of 0.8% in service prices and affecting a CPI increase of about 0.3 percentage points. From a year-on-year perspective, it was mainly affected by the high base in the same period last year, with the CPI in July dropping from the same period last month to -0.3%.

Zhang Xuewu, Director of the Analysis and Prediction Department of the Price Monitoring Center of the National Development and Reform Commission, stated that on the one hand, due to the high international oil price base and cyclical fluctuations in pig prices, domestic gasoline, diesel, and pork prices have decreased by 13.5% and 26% year-on-year, respectively, bringing down CPI by about 0.9 percentage points. This is an important reason for the low CPI operation in July; On the other hand, excluding food and energy, the core CPI rose by 0.8%, an increase of 0.4 percentage points from the previous month, indicating a sustained recovery in consumption, especially in service consumption demand.

Wen Bin, Chief Economist of China Minsheng Bank, believes that the CPI in July showed a "strong month on month and weak year on year" characteristic. The strong month on month is due to the rebound of energy prices and the recovery of core month on month, while the weak year on year is mainly due to the large increase in base last year. From a structural perspective, "weak food and strong services" are the main characteristics, with food being weaker than seasonality and related to the abnormal weather performance of the El Ni ñ o phenomenon, weak pork cycles, and China's increase in agricultural product imports. Strong services reflect the rebound in demand for cultural, entertainment, and tourism among summer residents. The CPI is slightly better than expected, especially with the rebound in core CPI, reflecting the current stabilization and recovery of domestic demand.

Pang Ming, Chief Economist and Director of Research at JLL Greater China, believes that recent efforts to promote consumption policies will hedge against structural factors such as weak physical consumption, slower recovery of service consumption, and a sluggish real estate chain. The core CPI is expected to remain stable or even gradually rebound driven by the rebound in consumer demand.

In July, the month on month and year-on-year decline in PPI narrowed due to factors such as overall sufficient domestic production and supply, improved demand in some industries, and transmission of international commodity prices. "Recently, with the gradual weakening of the high base effect and the effectiveness of various stable growth measures in China, the prices of major industrial products have gradually stabilized," said Zhang Xuewu. "Overall, as the decline in PPI in July narrows, June has been confirmed as the bottom of the current cycle of PPI growth decline. The year-on-year and month on month declines in upstream production materials have narrowed, while downstream living materials have rebounded." Wen Bin believes that in the future, as the high base effect of last year gradually declines, the year-on-year decline in PPI will continue to narrow.

Zhang Xuewu stated that from various economic indicators and market feedback, the current prices have shown a trend of bottoming out and stabilizing. Looking ahead to the later stage, as the economy continues to improve, demand steadily recovers, and the base effect weakens, it is expected that CPI will steadily rebound after hitting bottom in July, and the decline in PPI will further narrow. Wang Qing, Chief Macro Analyst of Dongfang Jincheng, believes that the drag effect of the decline in food prices in August on overall prices is expected to ease. In addition, the increase in service prices may further expand, and the year-on-year CPI in August has returned to a positive growth momentum. However, in a market pattern of weak consumption and sufficient supply, CPI will continue to operate at a low level for a period of time in the future.

"Although the CPI fell into a negative range in July, the overall price situation is not pessimistic. It is highly likely that both CPI and PPI growth rates will rebound in the future, and the bottom of this round of price trends can be basically confirmed." Wen Bin believes that with a series of "policy combinations" gradually exerting targeted, combined, and synergistic effects, China needs to rebound or promote core inflation to gradually achieve a historical mean return.