February CPI and PPI both exceeded expectations

On March 9, the National Bureau of Statistics released the price data for February. Both CPI (Consumer Price Index) and PPI (Producer Price Index) data exceeded market expectations.

Specifically, PPI year-on-year (-0.9%, expected -1.2%) has improved for three consecutive months, with a month-on-month increase of 0.4%, unchanged from last month; the year-on-year decline of PPIRM (Purchasing Price Index for Industrial Producers) has narrowed for seven consecutive months, with a month-on-month increase of 0.7%, and the growth rate has accelerated for three consecutive months. The month-on-month increase of CPI expanded from 0.2% last month to 1.0%, the highest in nearly two years; the year-on-year increase expanded from 0.2% last month to 1.3% (expected 0.8%), the highest in nearly three years.

In terms of sub-items, prices of computing power and upstream and downstream products related to artificial intelligence have risen significantly, while prices in industries related to “involutionary” competition governance, such as photovoltaics and lithium batteries, have rebounded.

What are the underlying drivers behind the data exceeding expectations? How is it related to the overall pace of economic recovery? What favorable conditions need to be accumulated to maintain the PPI’s recovery trend and eventually turn positive? Which industries present investment opportunities? Reporters from the “Daily Economic News” conducted interviews on these topics.

Demand Recovery, Policy Effectiveness

Feng Lin, Executive Director of the Research and Development Department at Dongfang Jincheng, pointed out in a text interview with “Daily Economic News” that the price trend at the beginning of the year continues the warming momentum since the second half of 2025, mainly due to increased consumer promotion and anti-involution efforts, as well as the accelerated rise in international gold prices.

Guotai Junan Fund Management Company stated in a text interview that the sustained recovery of PPI and PPIRM primarily stems from three major drivers: first, the upward movement of international commodity prices, with rising prices of non-ferrous metals and crude oil forming strong input cost support; second, the gradual emergence of anti-involution effects in industries like photovoltaics and lithium batteries, with product prices improving, for example, the price increase of photovoltaic equipment expanded by 2.7 percentage points from January to 3.2%, and the manufacturing price of lithium batteries turned positive to 0.2% from -1.1% in January; third, the development of new productive forces has significantly boosted the PPI of high-tech manufacturing and some downstream industries, with the explosive demand for computing power further driving up prices across related supply chains.

What is the relationship between PPI, PPIRM, and other statistical indicators? Are there any leading indicators among them? How is it related to the overall pace of economic recovery?

Guotai Junan Fund Management Company indicated that PPI reflects the selling prices of enterprise products, while PPIRM reflects raw material costs; the difference between the two can represent the profit situation of industrial enterprises. The price component of PMI (Purchasing Managers’ Index) can be seen as a leading indicator for PPI, while PPI, as a leading indicator upstream, theoretically transmits to CPI along the supply chain, serving as an upstream signal of price warming.

Currently, the narrowing year-on-year decline in PPI and continuous positive month-on-month figures are marginally positive signals for demand recovery and policy effectiveness. If PPI turns positive year-on-year and continues to rise, it indicates industrial profit improvement and enterprise expansion, signaling the onset of a comprehensive recovery cycle for the economy.

So, what favorable conditions need to be accumulated to maintain the PPI’s recovery trend and eventually turn positive?

In this regard, Guotai Junan Fund Management Company stated that it is necessary for fiscal policy to maintain reasonable investment in infrastructure, people’s livelihood, and other areas to effectively stimulate demand for upstream industrial products; the monetary environment should remain reasonably abundant to lower corporate financing costs, aiding the recovery of production and investment. At the same time, the continuous implementation of anti-involution measures in specific industries should be promoted to facilitate the orderly clearance of excess capacity. As domestic economic circulation becomes smoother and corporate profits improve, combined with the rise in external commodity prices, multiple favorable conditions are expected to lead to a positive year-on-year PPI in the future.

High Certainty in Computing Power and Related Links

In terms of sub-items, prices of computing power and upstream and downstream products related to artificial intelligence have risen significantly; prices in industries such as photovoltaics and lithium batteries related to “involutionary” competition governance have rebounded; prices in industries such as coal mining, cement manufacturing, and new energy vehicle manufacturing have seen narrowing declines.

Month-on-month, in February, prices of electronic semiconductor materials, external storage devices and components, and integrated circuit packaging and testing series rose by 2.8%, 1.2%, and 1.1%, respectively. Year-on-year, in February, prices for electronic components and dedicated electronic materials rose by 4.9%, prices for controlled micro motors rose by 1.6%, and prices for service consumption robots rose by 0.7%, with strong growth in high-end equipment, and prices for aircraft manufacturing rose by 7.7%.

This year, which industries present investment opportunities?

In this regard, Guotai Junan Fund Management Company stated that on one hand, the demand for the AI (artificial intelligence) computing power supply chain remains robust, with tight supply and demand in areas such as computing power, servers, and optical modules, providing upward price elasticity, making it a direction with high performance certainty. On the other hand, as “involutionary” competition gradually eases in the industry, prices in sectors such as photovoltaics and lithium batteries have stopped falling and begun to recover, leading to profit restoration. Meanwhile, benefiting from rising commodity prices and inflation expectations, upstream resources and building materials sectors have valuation recovery opportunities. Overall, this year, there is greater optimism for industries with expected price improvements and improving patterns, focusing on investment opportunities in AI computing power, upstream resources, and building materials.

Looking ahead, Feng Lin stated that on one hand, the situation in Iran is significantly driving up international oil prices, which will, to some extent, transmit domestically, creating upward momentum for CPI; on the other hand, service consumption prices will seasonally drop significantly after the Spring Festival, and it is expected that March CPI will turn to negative growth, with year-on-year growth rate falling to around 0.9%. This year’s government work report continues to set the CPI growth target at “around 2%.” With recent years showing low price levels, this growth target carries even greater significance than before. The “around 2%” CPI growth target this year will be more rigid than last year, indicating that expansion of domestic demand and anti-involution efforts will continue to advance.

Daily Economic News

(责任编辑：王治强 HF013)

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