February CPI and PPI Both Exceed Expectations

Everyday Economic News Reporter | Zhang Hong Everyday Economic News Editor | Jia Yunke

On March 9, the National Bureau of Statistics released February’s price data. Both the CPI (Consumer Price Index) and PPI (Producer Price Index) data exceeded market expectations.

Specifically, the PPI year-on-year (−0.9%, expected −1.2%) has improved for three consecutive months, with a month-on-month increase of 0.4%, remaining flat compared to last month; the PPIRM (Producer Purchase Price Index) year-on-year decline has narrowed for seven consecutive months, with a month-on-month increase of 0.7%, with the growth rate accelerating for three months in a row. The CPI month-on-month increase expanded from 0.2% last month to 1.0%, the highest in nearly two years; the year-on-year increase rose from 0.2% last month to 1.3% (expected 0.8%), the highest in nearly three years.

Looking at specific segments, prices of computing power and AI-related upstream and downstream products have risen significantly, along with a rebound in industries like photovoltaics and lithium batteries related to “involution” competition governance.

What are the underlying reasons for the data exceeding expectations? How does it relate to the overall economic recovery pace? What favorable conditions are needed to sustain the PPI recovery and turn it positive? Which industries present investment opportunities? The Daily Economic News reporter conducted interviews on these topics.

Demand Rebound and Policy Effectiveness

Feng Lin, Executive Director of the Research and Development Department at Orient Securities, told the Daily Economic News in an interview that the price trend at the beginning of the year continues the upward momentum since late 2025, mainly driven by increased efforts to stimulate consumption, combat involution, and the accelerated rise in international gold prices.

Guotai Fund Management Co., Ltd. pointed out in an interview that the ongoing recovery of PPI and PPIRM is mainly driven by three factors: first, rising international commodity prices, with increases in non-ferrous metals and crude oil providing strong input cost support; second, the effects of involution reduction in industries like photovoltaics and lithium batteries are gradually showing, with product prices improving—for example, photovoltaic equipment prices increased by 2.7 percentage points to 3.2% compared to January, and lithium battery manufacturing prices turned positive from −1.1% in January to 0.2%; third, the development of new productive forces has significantly boosted high-tech manufacturing and some downstream industries’ PPI, with explosive demand for computing power further driving prices along the industrial chain upward.

What is the relationship between PPI, PPIRM, and other statistical indicators? Are there leading indicators among them? How do they relate to the overall economic recovery pace?

Guotai Fund Management stated that PPI reflects the selling prices of industrial products, while PPIRM indicates raw material costs; the difference between the two can represent industrial enterprise profits. The PMI (Purchasing Managers’ Index) price component can be seen as a leading indicator of PPI, and as an upstream leading indicator, PPI theoretically transmits along the industrial chain to CPI, signaling upward price movement.

Currently, the narrowing of the YoY decline in PPI and its continued positive MoM growth are marginal signs of demand recovery and policy effectiveness. If PPI turns positive YoY and continues to rise, it indicates improved industrial profitability, enterprise expansion, and an overall economic recovery cycle.

What additional favorable conditions are needed to sustain the PPI recovery and turn it positive?

Guotai Fund Management indicated that it is necessary for fiscal policy to maintain reasonable investment in infrastructure and public welfare to effectively stimulate upstream industrial demand; monetary policy should remain reasonably ample to reduce corporate financing costs and support production and investment recovery. Additionally, continued implementation of involution reduction in specific industries and orderly elimination of excess capacity are essential. As domestic economic circulation becomes smoother and corporate profits improve, combined with rising external commodity prices, multiple favorable conditions are converging, making it likely that PPI YoY will turn positive in the future.

High Certainty in Computing Power and Related Sectors

From specific segments, prices of computing power and AI-related upstream and downstream products have risen notably; industries related to involution governance like photovoltaics and lithium batteries have seen prices rebound; coal mining, cement manufacturing, and new energy vehicle manufacturing have seen narrower declines.

Month-on-month, in February, prices of electronic semiconductor materials, external storage devices and components, and integrated circuit packaging and testing increased by 2.8%, 1.2%, and 1.1%, respectively. Year-on-year, in February, prices of electronic components and electronic specialized materials increased by 4.9%, control micro-motor prices rose by 1.6%, service robots manufacturing prices increased by 0.7%, and high-end equipment showed strong momentum, with aircraft manufacturing prices up by 7.7%.

Which industries present investment opportunities this year?

Guotai Fund Management responded that on one hand, demand in the AI (artificial intelligence) computing power industry chain remains strong, with tight supply and demand in computing, servers, and optical modules, making prices likely to rise, which offers high performance certainty. On the other hand, as involution competition gradually eases, prices in new energy sectors like photovoltaics and lithium batteries have stabilized and rebounded, with profit recovery underway. Additionally, benefiting from rising commodity prices and inflation expectations, upstream resources and building materials sectors have valuation repair opportunities. Overall, this year, sectors with expected price increases and improving patterns—such as AI computing power, upstream resources, and building materials—are favored for investment.

Looking ahead, Feng Lin said that on one hand, the Iran situation is significantly pushing up international oil prices, which will to some extent transmit domestically and generate CPI upward momentum; on the other hand, service consumption prices after the Spring Festival are seasonally expected to fall sharply, and the March CPI month-on-month is expected to turn negative, with year-on-year growth falling back to around 0.9%. The government work report this year set the CPI increase target at “around 2%.” In recent years, low price levels make this growth target even more significant. The “around 2%” CPI growth target this year will be more rigid than last year, indicating that efforts to expand domestic demand and combat involution will continue.