Data released by the National Bureau of Statistics on September 9th shows that in August, the national Consumer Price Index (CPI) rose 0.8% year-on-year and 0.4% month-on-month. The average CPI for the first eight months was 0.9% higher than the same period last year. Meanwhile, the Producer Price Index (PPI) for industrial products increased 3.8% year-on-year and 0.4% month-on-month in August. Purchase prices for industrial producers climbed 5.8% year-on-year and 0.3% month-on-month. For the January-August period, factory-gate prices were up 2.0% year-on-year, while purchase prices for industrial producers rose 3.2%.

Energy prices led the moderate rebound in August CPI growth. The CPI rose 0.8% year-on-year, widening by 0.3 percentage points from the previous month. On a monthly basis, it turned from a 0.1% decline to a 0.4% increase, primarily due to energy price movements. Data shows energy prices expanded from a 0.6% rise in July to 4.1% in August, contributing approximately 0.28 percentage points to the year-on-year CPI increase, an additional impact of about 0.24 percentage points compared to last month. Notably, gasoline prices surged 9.3%, with the increase expanding by 8.3 percentage points. On a sequential basis, domestic gasoline prices swung from a 10.7% fall to a 7.2% rise, contributing roughly 0.21 percentage points to the monthly CPI gain.

Feng Lin, Executive Director of the Research and Development Department at Golden Credit Rating, attributed the primary driver of the CPI rebound to renewed tensions in the Middle East and another surge in international oil prices during August, which widened energy price gains. Excluding energy, industrial consumer goods prices rose 1.8%, an acceleration of 0.3 percentage points, contributing about 0.42 percentage points to the yearly CPI increase. Specifically, gold jewelry prices jumped 33.6%, with the gain expanding by 9.0 percentage points, while tablet computers, computers, and mobile phones saw price increases of 21.5%, 19.6%, and 11.0%, respectively, all with widening margins. Feng Lin noted that the global AI investment boom has driven up chip prices, impacting costs for electronics, and the significant rise in international gold prices were also key factors behind the broader August CPI gains.

Food prices fell 1.4% year-on-year, a narrower decline of 0.1 percentage points from July, dampening the CPI by about 0.24 percentage points. Pork prices dropped 11.8%, with a reduced contraction of 1.5 percentage points, impacting the index by roughly 0.22 percentage points. Prices for fresh vegetables, fruits, grains, cooking oils, aquatic products, and dairy declined between 0.5% and 2.8%, collectively lowering the CPI by about 0.10 percentage points. Conversely, egg prices rose 18.5%, with the increase widening by 0.7 percentage points, contributing 0.07 percentage points to the annual CPI. Galaxy Macro believes the August food price recovery was weaker than seasonal norms. Historically, August is a period of seasonal food price increases, with weather factors often raising transportation and storage costs. However, the actual performance indicates that the overall food sector's support for the CPI remains below expectations, suggesting a still fragile foundation for consumer food price recovery.

Import-driven factors caused the PPI to turn from a monthly decline to an increase in August, with the yearly gain expanding. The PPI rose 0.4% month-on-month, reversing a 0.7% drop, and the year-on-year increase widened by 0.3 percentage points to 3.8%. Dong Lijuan, Chief Statistician at the NBS Urban Department, stated that in August, imported factors pushed up prices in domestic related industries, with international crude oil and non-ferrous metal prices rising and leading to increases in domestic sectors. Notably, oil extraction, refined petroleum product manufacturing, and organic chemical raw material manufacturing saw price hikes of 10.4%, 4.1%, and 0.9%, respectively. Non-ferrous metal smelting and rolling prices rose 0.8%. These four sectors collectively contributed approximately 0.31 percentage points to the monthly PPI increase. Feng Lin added that renewed US-Iran conflicts in August sparked an oil price rebound, boosting related domestic industries. Additionally, increased demand and supply constraints pushed up prices for copper and other non-ferrous metals, narrowing the decline in mining prices for non-ferrous metal ores and turning smelting and rolling prices from a monthly fall to a rise.

Beyond imported factors, Dong Lijuan highlighted that industrial transformation and upgrading have boosted demand and prices in certain sectors. For instance, electronic circuit manufacturing prices increased 3.5%, virtual reality equipment manufacturing rose 1.9%, and service consumer robot manufacturing climbed 0.3%. Biomass fuel processing and comprehensive utilization of waste resources prices each rose 0.3%. Seasonal factors also played a role; increased electricity and coal demand in August drove coal mining and washing prices up 2.8% and power supply prices up 1.4%. Year-on-year, among industries with rising prices, coal mining and washing soared 26.6%, non-ferrous metal smelting and rolling increased 20.8%, oil and gas extraction, petroleum coal and other fuel processing, and chemical raw material manufacturing rose 10.5%, 11.1%, and 9.1%, respectively. Electrical machinery and equipment manufacturing grew 5.9%, and computer, communication, and other electronic equipment manufacturing increased 5.3%. These seven sectors collectively raised the PPI by about 4.24 percentage points year-on-year, an increase of 0.37 percentage points from July. The six industries with the most significant downward pressure were electricity and heat production and supply, automobile manufacturing, non-metallic mineral products, pharmaceutical manufacturing, beverage and refined tea manufacturing, and agricultural and sideline food processing, with declines ranging from 1.7% to 5.3%, collectively reducing the PPI by approximately 0.74 percentage points.

Galaxy Macro argues that structurally, the August PPI rebound was primarily driven by a rally in upstream energy and resource prices rather than a broad recovery in mid-to-downstream demand. Meanwhile, prices in export-related sectors like computers, communication, and other electronic equipment continued to rise, indicating that external demand chains still provide support for local manufacturing prices.

Looking ahead, both CPI and PPI may see modest increases. Feng Lin predicts that with international oil prices remaining high in early September and electronics prices continuing to rise, coupled with seasonal food price increases, the yearly food price decline is likely to narrow. The September CPI could rebound to around 1.0%, remaining at a relatively low level. Overall, price levels are expected to stay moderate. Wen Bin, Chief Economist at Minsheng Bank, believes that with the pig cycle bottoming out and stabilizing, its drag on the CPI will gradually weaken. Additionally, the Mid-Autumn Festival and National Day consumption peak season should unleash service consumption potential, providing a foundation for core CPI recovery.

Regarding the PPI, Guolian Minsheng Macro suggests that September may see a phase-based "small peak" in the year-on-year reading. This is not a full reversal of the inflation cycle but a convergence of three short-term forces: first, the lagged effects of oil price rebounds since mid-July due to recurring geopolitical conflicts, which will concentrate in August and September; second, the high prosperity of the AI industry chain is continuously providing structural support to upstream non-ferrous metals, showing strong price resilience; and third, base effects. However, after October, the support from carry-over factors to the year-on-year PPI will weaken. Without unexpected strong domestic demand stimulus policies or new external supply disruptions, the PPI reading will face mild downward pressure.