February CPI and PPI both exceeded expectations

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

In detail, the year-over-year PPI (-0.9%, expected -1.2%) has improved for three consecutive months, with a month-over-month increase of 0.4%, the same as the previous month. The year-over-year decline in PPIRM (Producer Price Index for Industrial Producers Purchasing) has narrowed for seven consecutive months, and the month-over-month increase was 0.7%; the growth rate has accelerated for three consecutive months. The month-over-month rise in CPI 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.

Judging from the sub-items, prices of products in computing power and AI-related upstream and downstream sectors rose noticeably, and industry prices such as photovoltaic and lithium batteries—linked to “involution-style” competition governance—rebounded.

What are the underlying drivers behind the data beating expectations? How is it related to the overall pace of economic recovery? What favorable conditions still need to be accumulated for PPI to maintain its recovery trend and eventually turn positive again? Which industries have investment opportunities? Reporters from the Economic Daily News conducted interviews on this.

Demand rebounds, and policy effects show

Feng Lin, Executive Director of the Research and Development Department at Oriental Jincheng, said in a written interview with Economic Daily News reporters that the early-year price trend is still continuing the rebound momentum that began in the second half of 2025. The main drivers are increased efforts to boost consumption and fight against involution, as well as accelerating moves in the international gold price.

In a written interview with reporters, China Guotai Asset Management Co., Ltd. stated that the continued recovery in PPI and PPIRM mainly comes from three driving forces: first, international bulk commodity prices moving higher; rising prices of non-ferrous metals and crude oil provide strong imported cost support. Second, anti-involution effects in sectors such as photovoltaics and lithium batteries gradually become evident, leading to improved product prices—for example, the growth in photovoltaic equipment prices expanded by 2.7 percentage points from January to 3.2%, and the year-over-year manufacturing price of lithium batteries turned from -1.1% in January to positive 0.2%. Third, the development of new quality productive forces exerts clear pull on high-tech manufacturing industries and some downstream sectors’ PPI; the explosion in computing power demand further pushes up prices across related industrial chains.

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

China Guotai Asset Management Co., Ltd. said that PPI reflects the selling prices of corporate products, while PPIRM reflects raw material costs. The difference between the two can represent the profit situation of industrial enterprises. The PMI (Purchasing Managers’ Index) price sub-component can be viewed as a leading indicator for PPI, and since PPI serves as an upstream leading indicator, in theory it will transmit along the industrial chain to CPI—an upstream signal of price recovery.

At present, the narrowing decline in PPI year over year and the continued positive month over month are marginal recovery signals from demand rebounding and policies taking effect. Going forward, if PPI turns positive year over year and continues to rise, it would imply improving industrial profitability, companies expanding production, and the economy entering a full-scale recovery cycle.

So, what favorable conditions still need to be built up for PPI to maintain its recovery trend and ultimately return to positive territory?

In response, China Guotai Asset Management Co., Ltd. said it is necessary to keep fiscal spending at a reasonable level for infrastructure and people’s livelihood projects to effectively boost upstream industrial goods demand; maintain a reasonably ample monetary environment to lower corporate financing costs and help production and investment recover. At the same time, continue implementing anti-involution measures in subdivided industries to promote the orderly exit of excess capacity. As domestic economic circulation becomes smoother and corporate earnings improve, combined with rising external bulk commodity prices, multiple favorable conditions will compound, and PPI year-over-year is expected to return to positive in the future.

High certainty in links such as computing power

Looking at sub-items, prices of products related to computing power and AI rose noticeably; prices in industries such as photovoltaics and lithium batteries—linked to “involution-style” competition governance—rebounded; and the declines narrowed in sectors such as coal mining, cement manufacturing, and new energy vehicle manufacturing.

On a month-over-month basis, in February, prices rose by 2.8% for electronic semiconductor materials, 1.2% for external storage equipment and parts, and 1.1% for integrated circuit packaging and testing series. On a year-over-year basis, in February, prices of the manufacturing of electronic components and electronic specialty materials rose 4.9%, prices for controlling micro-motors rose 1.6%, prices for manufacturing service consumption robots rose 0.7%, and high-end equipment saw strong momentum, with aircraft manufacturing prices up 7.7%.

This year, which industries have investment opportunities?

In response, China Guotai Asset Management Co., Ltd. stated that on the one hand, demand related to the AI (artificial intelligence) computing power industrial chain has remained robust; supply and demand in segments such as computing power, servers, and optical modules are relatively tight, with prices having upward elasticity, making them directions with relatively high certainty in terms of performance. On the other hand, as industry “involution-style” competition gradually eases, prices in new energy sectors such as photovoltaics and lithium batteries stop falling and rebound, and profitability is set to recover. Meanwhile, benefiting from higher commodity prices and inflation expectations, upstream resources and building materials sectors have opportunities for valuation recovery. Overall, this year, the outlook is more favorable for industries where prices have expectations and the competitive landscape is improving; key focus areas include 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 currently sharply pushing up international oil prices, which will transmit to the domestic market to some extent and form 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 month over month in March will turn negative growth, with the year-over-year increase falling back to around 0.9%. The government work report for this year keeps the CPI increase target at “around 2%.” In recent years, the overall price level has been relatively low; the significance of this growth target is greater than in the past. The “around 2%” CPI target this year will have more rigidity than last year, meaning that expanding domestic demand and continuing to fight involution will be steadily promoted.

Economic Daily News

(Editor: Wang Zhiqiang HF013)

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