June PPI’s month-on-month rate turns from rising to falling, drawing attention—has the pricing momentum faded?

【Caixin】 After the outbreak of the Iran-U.S. war, international commodity prices rose rapidly, lifting China’s Producer Price Index (PPI) for industrial producers into positive territory early and sustaining its upward trend. In June, China’s PPI year-on-year continued to climb. However, as the situation in the Middle East eased and oil prices pulled back, the month-on-month change had already shifted from increasing to decreasing. What will China’s PPI trend look like in the second half of the year, and when will it reach its peak on a year-on-year basis?

Since March, there have been three main forces driving the rapid rise in PPI: first, temporary factors caused by the war, mainly reflected in the fast climb in international commodity prices, represented by crude oil; second, industrial upgrading such as artificial intelligence and green transition expanding demand for related products in a trendlike manner, reflected in continued price increases in areas including the manufacturing of storage equipment and electronic specialty materials; third, base effects—starting in March 2025, the size of the PPI decline kept widening, expanding from 2.2% in February of that year to 3.6% in June, staying flat at that level in July, and then beginning to narrow rapidly from August onward.