February CPI and PPI both exceeded expectations

On March 9, the National Bureau of Statistics released February’s inflation data. Both CPI (Consumer Price Index) and PPI (Producer Price Index) came in above market expectations.

Looking at the details, year-over-year PPI (-0.9%, expected -1.2%) continued improving for the third consecutive month, with a month-over-month increase of 0.4%, unchanged from the previous month. PPIRM (Producer Price Index for Purchases) has narrowed its year-over-year decline for seven consecutive months; the month-over-month increase rose 0.7%, and the growth rate has accelerated for three consecutive months. The month-over-month CPI increase expanded from 0.2% last month to 1.0%, the highest in nearly two years; the year-over-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, the prices of computing power and upstream and downstream products related to artificial intelligence rose significantly, and prices in industries associated with “involution-style” competition governance—such as photovoltaics and lithium batteries—rebounded.

What drives the data to exceed expectations? How is it related to the overall pace of economic recovery? What favorable conditions still need to be accumulated to keep PPI in a repair trend and ultimately turn it positive? Which industries have investment opportunities? A reporter from the Daily Economic News conducted interviews on this.

Demand rebounds, and policy effects take hold

Feng Lin, Executive Director of the Research and Development Department at Oriental Jincheng, said in a written interview with a reporter from the Daily Economic News that at the beginning of the year, the inflation trend is still continuing the rebound momentum seen since the second half of 2025. The main reasons behind this are the greater efforts to stimulate consumption and intensifying efforts against “involution,” as well as international gold prices accelerating upward.

In a written interview with the reporter, Guotai Fund Management Co., Ltd. said that the continued repair in PPI and PPIRM mainly comes from three drivers: first, international bulk commodity prices are rising. Higher prices for non-ferrous metals and crude oil provide strong input-cost support. Second, the anti-involution effects in industries such as photovoltaics and lithium batteries are gradually becoming apparent, and product prices have improved—for example, the price increase of photovoltaic equipment expanded by 2.7 percentage points from January to 3.2%, and the year-over-year manufacturing price of lithium batteries shifted from -1.1% in January to 0.2%. Third, the development of new-quality productive forces provides a clear boost to PPI for high-tech manufacturing and some downstream industries. A surge in computing-power demand further drives prices up across the related industrial chain.

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 Fund Management Co., Ltd. said that PPI reflects the selling prices of enterprises’ products, while PPIRM reflects the costs of raw materials. The difference between the two can represent the profit conditions of industrial enterprises. The price component of the PMI (Purchasing Managers’ Index) can be seen as a leading indicator of PPI. Since PPI acts as an upstream leading indicator, in theory it transmits along the industrial chain to CPI; it is an upstream signal of improving prices.

Currently, the narrowing year-over-year decline in PPI and continued positive month-over-month readings are marginal signals of repair driven by a rebound in demand and effective policy implementation. Going forward, if PPI turns positive year-over-year and continues rising, it will mean improved industrial profitability, companies expanding capacity, and the economy entering a period of broad-based recovery.

So, to keep PPI on a repair trend and ultimately return it to positive territory, what favorable conditions need to be built up?

In response, Guotai Fund Management Co., Ltd. said that it is necessary to maintain reasonable investment in areas such as infrastructure and people’s livelihoods to effectively boost upstream industrial goods demand; and to keep the monetary environment reasonably ample to reduce corporate financing costs and support the recovery of production and investment. At the same time, continue to implement anti-involution measures in specific industries, promoting the orderly exit of excess capacity. As domestic economic circulation becomes smoother and corporate earnings improve, together with rising prices of external bulk commodities, multiple favorable conditions will coincide. With all these factors, PPI’s year-over-year turn to positive is expected in the future.

High certainty in stages such as computing power

In terms of sub-items, prices of computing power and products across the upstream and downstream segments related to artificial intelligence rose notably. Prices in industries linked to “involution-style” competition governance—such as photovoltaics and lithium batteries—rebounded. Price declines narrowed in industries including coal mining, cement manufacturing, and new-energy passenger vehicle manufacturing.

On a month-over-month basis, in February, prices of electronic semiconductor materials, external storage devices and components, and integrated circuit packaging and testing-related series rose by 2.8%, 1.2%, and 1.1%, respectively. On a year-over-year basis, in February, prices in the manufacturing of electronic components and electronic specialty materials rose 4.9%; prices of controlling micro motors rose 1.6%; the manufacturing price of service consumer robots rose 0.7%; and growth in high-end equipment was strong, with aircraft manufacturing prices rising 7.7%.

Which industries have investment opportunities this year?

In response, Guotai Fund Management Co., Ltd. said that on the one hand, demand related to the AI (artificial intelligence) computing power industrial chain has remained strong. In key areas such as computing power, servers, and optical modules, supply and demand are relatively tight, and prices have upward elasticity, making this a direction with high earnings certainty. On the other hand, as industry “involution-style” competition gradually eases, prices in new-energy fields such as photovoltaics and lithium batteries stop falling and rebound, and profitability will enter a repair phase. Meanwhile, benefiting from commodity price increases and inflation expectations, upstream resource and building materials sectors have opportunities for valuation repair. Overall, this year, the focus is on industries where prices have expectations and the competitive landscape is improving, with key attention on investment opportunities in AI computing power, upstream resources, and building materials.

Looking ahead, Feng Lin said that on the one hand, the situation in Iran is substantially pushing up international oil prices, which to a certain extent will transmit to the domestic market, forming momentum for CPI to rise. On the other hand, after the Spring Festival, service consumption prices will seasonally fall sharply, and it is expected that CPI’s month-over-month growth in March will turn negative, with the year-over-year increase declining back to around 0.9%. In this year’s Government Work Report, the CPI increase target will continue to be set at “around 2%.” In recent years, the overall price level has been relatively low, and this growth target has greater significance than in the past. This year’s “around 2%” CPI target will have more rigidity than last year, which also means that expanding domestic demand and pushing forward anti-involution efforts will continue.

Daily Economic News

(Editor-in-charge: Wang Zhiqiang HF013)

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