China International Capital Corporation comments that in April 2026, prices increased by 1.7% month-on-month, and the year-over-year growth rate expanded from 0.5% last month to 2.8%. The PPI growth exceeded expectations, mainly due to price increases concentrated in the energy and chemical industries. The CPI rose 0.3% month-on-month, outperforming seasonal expectations, and the year-over-year increase also rebounded from 1.0% last month to 1.2%, mainly driven by energy prices and holiday travel demand. Looking ahead, CICC believes that amid ongoing tug-of-war in US-Iran negotiations, international oil prices are likely to remain volatile at high levels, with a lag in price transmission from oil shocks. They expect the YoY growth of PPI and CPI to continue rising over the next two months. However, the current phase of production-side price recovery shows clear structural differentiation, with upstream price increases significantly stronger than downstream. In an environment of weak terminal consumer demand, imported cost-driven inflation may continue to suppress profits in mid- and downstream industries.

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CICC: Structural Inflation Features Highlighted — April 2026 Price Data Review

In April, PPI increased by 1.7% month-on-month, and the YoY growth rate expanded from 0.5% last month to 2.8%. The PPI increase exceeded expectations, mainly due to price rises concentrated in the energy and chemical industries. The CPI rose 0.3% month-on-month, outperforming seasonal norms, and the YoY increase also rebounded from 1.0% last month to 1.2%, mainly supported by energy prices and holiday travel demand. Looking forward, we believe that amid persistent US-Iran negotiations, international oil prices are likely to stay high and volatile, with a lag in price transmission from oil shocks. The YoY growth of PPI and CPI is expected to continue upward over the next two months. However, the current phase of production-side price recovery shows significant structural differentiation, with upstream price increases notably stronger than downstream. In an environment of weak terminal demand, cost-push inflation driven by imported costs may continue to pressure profits in mid- and downstream sectors.

1. PPI growth exceeds expectations, mainly due to high contribution from energy and chemical industries

In April, the YoY growth of PPI expanded from 0.5% last month to 2.8%, with a 1.7% month-on-month increase, further surpassing the 1.0% rise last month. The month-on-month PPI increase significantly exceeded predictions based on PMI factory gate prices and raw material indices. We believe this is related to the high concentration of PPI contribution from a few industries. Historically, when mining and upstream manufacturing contribute heavily to PPI month-on-month, the predicted PPI based on PMI price indices often deviates significantly from actual values. This is because PMI price indices are diffusion indicators, emphasizing the breadth of price changes, and when a few industries see large PPI increases, the prediction errors based on PMI tend to be amplified.

A key reason for this unexpected PPI rise is the high concentration of increases in energy and chemical chains. In April, PPI for oil and gas extraction, petroleum and coal processing, chemical raw materials and products, chemical fiber manufacturing, and rubber and plastic products rose by 18.5%, 16.4%, 8.3%, 5.6%, and 1.7% respectively. We estimate these five energy and chemical-related industries collectively contributed about 1.5 percentage points to the 1.7% month-on-month PPI increase.

Additionally, demand recovery in AI and coal sectors also boosted PPI. On one hand, rising demand for AI computing power and accelerated industrial electrification drove fiber optic manufacturing prices up 22.5% month-on-month, storage device and component prices up 3.2%, and prices in non-electrical metal mining and smelting industries up 3.0% and 0.2%. On the other hand, energy shocks led to substitution demand, with some replenishment needs for thermal coal, along with increased demand in chemicals and metallurgy, pushing coal mining and washing industries’ prices up 1.9%. Contributions from electronic communication equipment manufacturing, non-electrical metal mining and processing, and coal extraction added about 0.1 percentage points to the PPI month-on-month.

Other 30 industries contributed only about 0.1 percentage points, indicating a clear structural feature in PPI increases. The divergence between producer materials and consumer materials YoY widened from 2.3 percentage points last month to 4.8 points. Facing cost pressures from high oil prices and weak demand, some mid- and downstream industries with limited pass-through capacity saw their PPI YoY declines widen, notably in non-metallic mineral products and power heat production and supply sectors, squeezing profit margins.

2. CPI YoY slightly up, driven by energy and service prices, food prices drag

In April, CPI increased by 1.2% YoY, up 0.2 percentage points from last month, mainly supported by energy prices and holiday travel services. Our estimates show that compared to last month, gasoline and service prices contributed about 0.45 and 0.23 percentage points to the CPI YoY increase, respectively, while food prices remained weak, marginally dragging the CPI YoY down by 0.33 percentage points. The CPI rose 0.3% month-on-month, outperforming the ten-year average of -0.04%.

Energy prices contributed significantly. Due to high international oil prices, domestic refined oil prices increased sharply, with gasoline prices up 12.6% month-on-month. Coupled with a low base, gasoline’s YoY increase expanded from 3.8% last month to 19.3%, contributing about 0.56 percentage points to the CPI YoY, an increase of 0.45 points from last month and the main driver of the CPI rebound.

Food prices turned from slight increase (0.3%) last month to a decline of 1.6%, dragging the overall index down. Pork prices, based on sow and piglet stock data, faced supply pressures in April, with pork prices down 5.7% month-on-month (vs. -3.4% ten-year average), and YoY decline widening from 11.5% last month to 15.2%. Fresh vegetable prices fell 6.4% month-on-month (vs. -5.4% ten-year average), with YoY change shifting from +4.9% last month to -0.5%. Fresh fruit prices declined 2.3% month-on-month (vs. -0.2% ten-year average), with YoY also turning negative from +4.0% last month to -1.0%. Our estimates show that pork, fresh vegetables, and fresh fruit prices marginally dragged CPI YoY down by 0.07, 0.10, and 0.10 percentage points, respectively.

Core CPI YoY rose from 1.0% last month to 1.1%, supported by increased demand for travel services during holidays. Travel service prices increased 3.7% YoY, contributing about 0.13 percentage points to CPI YoY. Medical and education services also rose 3.4% and 0.5% YoY, pushing core CPI from 0.8% to 0.9%. In the “old-for-new” category, household appliance prices rose 2.6% YoY, up 0.2 percentage points from last month, while communication tools increased 4.2% YoY, likely driven by AI computing demand and storage device prices. Transportation tools declined 1.2% YoY, easing 0.1 points. International gold prices fluctuated downward from high levels, with domestic gold jewelry prices’ YoY increase falling from 65.8% last month to 46.9%. Our estimates indicate that services and “old-for-new” prices contributed about 0.06 and 0.05 percentage points to core CPI YoY, while gold jewelry prices marginally dragged core CPI down by 0.08 points.

3. Attention to the differential and lag effects of high oil prices on various industries

Looking ahead, we believe that amid ongoing US-Iran negotiations, international oil prices may remain high and volatile in the short term. The transmission of oil shocks’ impact is gradually easing, and the YoY growth of PPI and CPI may further rise over the next two months, with the PPI turning point depending on the Strait of Taiwan’s opening. It is also important to monitor the differential and lag effects of high oil prices across industries. Under weak terminal demand, cost-push inflation driven by imported costs may further harm profits in mid- and downstream sectors.

Charts:

Chart 1: Breakdown of CPI component growth and contribution