In June, CPI year-on-year is expected to continue a moderate rise, while PPI year-on-year growth may expand.

July 5, a number of industry insiders interviewed by Securities Daily reporters conducted a forward-looking analysis on the trends of the June Consumer Price Index (CPI) and Producer Price Index (PPI). The interviewed industry insiders generally believe that since June, agricultural product prices have continued their downward trend overall, and domestic refined oil prices have been lowered twice. Therefore, CPI may turn from positive to negative month-on-month, while continuing a moderate upward trend year-on-year; international oil prices continue their downward trend, and domestic industrial product prices have fallen overall. It is expected that the month-on-month growth rate of PPI will turn negative, while the year-on-year increase will expand.

On the CPI front, Wen Bin, chief economist at Minsheng Bank, told Securities Daily reporters that he expects a month-on-month decline of 0.3% in June and a year-on-year increase of 1.0%. Bian Quanshui, chief macro analyst at Western Securities, told Securities Daily reporters that he expects the month-on-month growth rate of CPI in June to be negative, with a year-on-year increase of 1.2%. A research report from Huachuang Securities shows that it expects CPI to fall about 0.1% month-on-month in June, and to be flat year-on-year compared to May at around 1.2%.

Wen Bin specifically analyzed that in June, the average of the agricultural product wholesale price index (200 items) was 112.6 points, down 1.4% month-on-month. By sub-item, fruit prices fell 3.3% month-on-month due to the concentrated market supply of various summer fruits; pork prices fell 2.0% month-on-month, as rising temperatures led to generally weak pork consumption and sluggish terminal market transactions; affected by seasonal crop rotation, vegetable prices rose 1.9% month-on-month; egg prices rose 11.7% month-on-month, which was the result of a two-way mismatch between tight supply and concentrated demand release. At the same time, the risk premium for international oil prices continued to unwind, leading to two consecutive reductions in domestic refined oil prices.

Regarding core CPI, Wen Bin stated that in June, the service sector business activity index was 50.4%, up 0.1 percentage point from May, indicating a rise in the level of prosperity, which supports related service prices; driven by the graduation season in June, short-term rental demand was concentrated, and the average rent for residential housing in 50 cities rose 0.08% month-on-month. However, clothing prices usually show a seasonal decline, mainly driven by seasonal clearance and e-commerce promotions.

On the PPI front, Wen Bin expects a month-on-month increase of 0.2% in June and a year-on-year increase of 4.5%. Bian Quanshui said that the month-on-month growth rate of PPI in June may turn negative, while the year-on-year growth rate will rise slightly to 4.1% compared to May. A research report from Huachuang Securities also shows that it expects PPI to be about -0.2% month-on-month in June, with the year-on-year increase rising from 3.9% to around 4.1%.

Wen Bin stated that in June, the main raw material purchase price index and factory gate price index were 54.2% and 48.2%, respectively, down 6.3 percentage points and 3.7 percentage points from May. Factory gate prices fell below the boom-bust line, the increase in raw material purchase prices narrowed, and the divergence between upstream and downstream continued. The monthly average of production material prices, as calculated by the Ministry of Commerce on a weekly basis, rose 0.66% month-on-month, lower than the 1.4% in May, marking the second consecutive month of decline. Based on PMI indicators and high-frequency data, it is expected that PPI in June may rise slightly month-on-month, but due to the low base in the same period last year, the year-on-year increase may be higher than in May.

The Huachuang Securities research report believes that the year-on-year increase in PPI may be close to its peak for the year. The rapid decline in oil prices has offset the favorable low base effect from June to July. Even though midstream equipment manufacturing prices continue to support PPI month-on-month, it is difficult to offset the drag from the crude oil and chemical chain. Currently, the spot price of Brent crude oil has basically fallen back to the level before the international geopolitical conflict, while the average contribution of the crude oil and chemical chain to PPI month-on-month from March to May was about 0.8 percentage points, and most of this contribution may turn into a drag again from June to August. The contribution of midstream equipment manufacturing to PPI month-on-month averaged about 0.15 percentage points per month in the first five months of this year, which is difficult to offset the price decline in the crude oil and chemical chain.

[Author: Meng Ke] (Editor: Wen Jing)

Keywords:

                                                            CPI
                                                            PPI