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 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 months in a row, with a month-on-month increase of 0.7%, accelerating for three consecutive months. 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 for computing power and AI-related upstream and downstream products rose significantly, along with a rebound in industries like photovoltaics and lithium batteries, which are related to “involution” competition governance.

What are the reasons behind the data exceeding expectations? How does it relate to the overall economic recovery pace? What favorable conditions are needed for PPI to maintain its recovery trend and turn 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 rebound momentum since late 2025, mainly driven by increased efforts to stimulate consumption and combat involution, as well as 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% since 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, 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 enterprises’ products, while PPIRM reflects raw material costs; the difference between the two can indicate 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, serving as an early signal of price recovery.

Currently, the narrowing of the YoY decline in PPI and the 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 trend and turn it positive?

Guotai Fund Management indicated that it is necessary for fiscal policy to maintain reasonable investment in infrastructure and people’s livelihoods 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 for computing power and AI-related upstream and downstream products have risen notably; industries related to involution reduction 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 for 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 for electronic components and electronic special 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 for computing power, 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 profits recovering. 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 situation in Iran is significantly pushing up international oil prices, which will to some extent transmit domestically, creating upward momentum for CPI; on the other hand, service consumption prices tend to fall sharply seasonally after the Spring Festival, and it is expected that March CPI will turn to negative month-on-month growth, with the year-on-year increase falling back to around 0.9%. The government work report this year set the CPI increase target at “around 2%.” In recent years, with relatively low price levels, this growth target is more significant than before. The “around 2%” CPI target this year will be more rigid than last year, indicating that efforts to expand domestic demand and combat involution will continue.