February CPI increased by 1.3% year-on-year, showing a moderate rebound; PPI decline continues to narrow

On March 9th, the National Bureau of Statistics released data showing that in February, the Consumer Price Index (CPI) increased by 1.0% month-on-month and by 1.3% year-on-year. Core CPI, excluding food and energy prices, rose by 1.8% year-on-year. The Producer Price Index (PPI) for industrial producers increased by 0.4% month-on-month but decreased by 0.9% year-on-year, with the decline narrowing continuously.

Wen Bin, Chief Economist at Minsheng Bank, told Securities Daily that in February, the price level continued its upward trend. Looking ahead, with a combination of policies aimed at “pushing the overall price level from negative to positive and reasonably moderate recovery in consumer prices” and “implementing more proactive macroeconomic policies,” coupled with the turning point of the pig cycle and support from global commodity prices, a moderate rebound in CPI and a narrowing, then turning positive, PPI decline are highly probable events.

Service Prices Rise Significantly

Regarding CPI, from a month-on-month perspective, the national CPI increased from 0.2% in January (hereinafter referred to as “last month”) to 1.0%, the highest in nearly two years. According to Dong Lijuan, Chief Statistician of the Urban Department at the National Bureau of Statistics, this was mainly due to the long Spring Festival holiday leading to concentrated release of consumer demand, resulting in a significant increase in service prices, which exceeded seasonal levels.

Specifically, service prices rose by 1.1%, an increase of 0.9 percentage points from last month, contributing approximately 0.54 percentage points to the CPI month-on-month increase. Among services, airline tickets, transportation rentals, travel agency fees, and hotel accommodations increased by 31.1%, 24.7%, 15.8%, and 7.3%, respectively. These four items together contributed about 0.32 percentage points to the CPI increase, accounting for over 30% of the total. Pet services, vehicle repairs and maintenance, and domestic services increased by 12.0%, 11.6%, and 3.1%, respectively. Movie and theater ticket prices and dining out outside increased by 9.9% and 1.1%. These five categories together contributed about 0.18 percentage points to the CPI increase.

Industrial consumer goods prices rose by 0.4%, an increase of 0.1 percentage points from last month. Influenced by rising international gold prices, domestic gold jewelry prices increased by 6.2%. The impact of geopolitical conflicts on energy prices was evident, with domestic gasoline prices rising by 3.1%. These two factors together contributed about 0.12 percentage points to the CPI month-on-month increase.

Although food prices increased by 1.9% from last month, this is still below seasonal levels, contributing approximately 0.33 percentage points to the CPI increase. During the holiday period, demand for aquatic products, fresh fruits, and pork rose by 6.9%, 4.0%, and 4.0%, respectively. Lamb, beef, eggs, and poultry prices increased between 1.6% and 2.2%. These five categories together contributed about 0.34 percentage points to the CPI. Fresh vegetable markets had ample supply, and prices decreased by 0.1%.

Wen Bin stated that CPI will continue its moderate upward trend. In terms of food, under the combined effects of policies and market forces, the capacity reduction of breeding sows has accelerated significantly, and pork supply may see a substantial contraction in the second half of 2026, supporting higher pork prices. Regarding energy, oil prices are expected to rise sharply.

Year-on-year, due to the overlapping effects of the Lunar New Year holiday shift and the recovery of consumer demand, the national CPI increased from 0.2% last month to 1.3%, the highest in nearly three years. Service prices rose by 1.6%, an increase of 1.5 percentage points from last month, contributing about 0.75 percentage points to the year-on-year CPI. Food prices for fresh vegetables, beef, lamb, and fresh fruits increased between 5.9% and 10.9%, with all increases larger than last month, contributing about 0.41 percentage points to the year-on-year CPI. Pork and egg prices decreased by 8.6% and 3.0%, respectively, with the declines narrowing compared to last month, contributing about -0.18 percentage points to the year-on-year CPI.

Feng Lin, Executive Director of the Research and Development Department at Dongfang Jincheng, told Securities Daily that the 1.3% year-on-year increase in CPI in February was mainly driven by holiday-related consumption boosting prices for travel services and food.

PPI Continues to Rise for Five Consecutive Months

Regarding PPI, from a month-on-month perspective, the national PPI increased by 0.4%, the same as last month, marking five consecutive months of growth.

Discussing the main features of PPI in February, Dong Lijuan attributed it to two factors: first, rising international prices of non-ferrous metals and crude oil driving domestic related industries higher. Prices in the non-ferrous metal mining and smelting industries increased by 7.1% and 4.6%, respectively. Oil and natural gas extraction, refined petroleum products manufacturing, and organic chemical raw materials manufacturing increased by 5.1%, 0.7%, and 1.3%. Due to cost pressures, electrical machinery and equipment manufacturing prices rose by 1.2%, with wire and cable manufacturing prices increasing by 2.3%. Second, growth in computing power and demand in certain industries pushed prices higher. Prices in computer, communication, and other electronic equipment manufacturing increased by 0.6% month-on-month.

Year-on-year, the national PPI decreased by 0.9%, narrowing the decline by 0.5 percentage points from last month, marking the third consecutive month of narrowing decline.

Dong Lijuan noted that the effects of macro policies are continuing to show, with some industries experiencing positive changes. First, the modernization of the industrial system is accelerating, with related industry prices rising year-on-year. The booming development of “AI+” has led to a 4.9% increase in electronic components and specialized electronic materials, a 1.6% increase in control micro-motors, and a 0.7% increase in service robots manufacturing. Green transformation is ongoing, with biomass fuel processing prices up by 3.2% and environmental protection equipment manufacturing prices up by 0.6%. High-end equipment manufacturing is strong, with aircraft manufacturing prices up by 7.7%, ship and related device manufacturing prices up by 0.5%, and additive manufacturing equipment prices up by 0.3%. Second, market competition continues to improve, with some industries stabilizing and rebounding year-on-year. Capacity management and anti-competition measures have been effective, with photovoltaic equipment and component manufacturing prices rising by 3.2%, an increase of 2.7 percentage points from last month; lithium-ion battery manufacturing prices, which had fallen 1.1% last month, turned positive with a 0.2% increase, the first rise after 33 months of decline; coal mining and washing, cement manufacturing, new energy vehicle manufacturing, and ferrous metal smelting and rolling prices saw narrower declines compared to last month by 2.8, 1.5, 0.5, and 0.3 percentage points, respectively.

Wen Bin analyzed that PPI is expected to continue its recovery and turn positive by mid-year. First, with consecutive month-on-month increases, profits for mid- and downstream companies will improve, encouraging expansion and creating a positive cycle. Second, resource prices such as crude oil, copper, and coal rebounded unexpectedly, directly lifting domestic extraction and raw material prices, which is a key marginal factor in PPI recovery. Third, as policies against “involution” (excessive internal competition) deepen, enterprises are governed according to laws and regulations to curb disorderly low-price competition, and capacity management in key industries is advancing. Additionally, rapid development of emerging industries and effective release of consumption potential will continuously strengthen the foundation for reasonable price recovery.