CHINA ECONOMY：ON TRACK FOR PRICE REFLATION
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2025-11-10 12:20:29
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China YoY CPI rebounded back to positive territory thanks to the recoveringfood price and core inflation. Core CPI rose to another high, driven by thegradual recovery in service sector while durable goods remained subdued. PPImarked the first positive MoM growth in a year and narrowed its YoYcontraction, as mining sectors including coal and ferrous metals saw notable surges. Downstream consumer goods remained subdued, as manufacturing ofdurable goods saw another decline. We have seen a mild price reflation inservice and upstream manufacturing sectors, but the subdued durable goodsand property sales raised questions about the consistency of the price reflation.We believe demand-driven reflation is likely to prove more sustainable thansupply-induced price increases, which may encourage policymakers toenhance fiscal support for households and the real estate sector in 4Q25, toreinforce the ongoing price recovery and sustain economic growth. CPI mayremain unchanged at 0.2% in 2025 and PPI may drop from -2.2% in 2024 to -2.5% in 2025, while their growth in 4Q may recover to 0.4% and -2.2% from -0.2% and -2.9% in 3Q.
CPI notably rebounded thanks to recovering core CPI and food price.
China’s CPI YoY recovered to 0.2% in Oct from -0.3% in Sep, above marketexpectation at -0.1%. The drag from food narrowed to -2.9% YoY in Oct from-4.4%. In sequential terms, CPI rebounded to 0.2% from 0.1% in Sep. Foodprice increased by 0.3% MoM in Oct, as vegetable price rebounded by 4.3%,while pork price further dropped 2.5% in Oct. Vehicle fuel price dropped0.8% MoM due to declining crude oil price. We expect the CPI to recover to0.5% YoY in Nov due to lower base last year. High frequency data indicatedthe pork and vegetable prices were rebounding in early Nov while gas priceremained subdued.
Core CPI continued to pick up as consumer demand for servicesgradually recovered. Core inflation edged up to 1.2% YoY in Oct from 1%in Sep. Its MoM growth rose to 0.2% from 0%. Service price rose to 0.2%MoM in Oct, as tourism price expanded by 2.5% thanks to the nationalholiday. Prices of hotel accommodation, airline tickets and tourism notablysurged. Medical and home services also saw 0.5% and 0.1% MoM growthwhile education, express and telecom services saw no change. Durablegoods remained subdued, as home appliances and vehicles both saw -0.1%drop in Oct, while telecom equipment remained unchanged. Discretionarygoods moderated as prices of clothing and footwear dropped to 0.1% and -0.1% from 0.7% and 0.8% in Sep.
PPI marked the first positive MoM growth in a year. YoY contraction ofPPI narrowed to -2.1% in Oct from -2.3% in Sep, beating the marketexpectations at -2.3%. The MoM growth saw the first positive reading in Octat 0.2% since Nov 2024. PPI of upstream sectors saw 0.1% growth asmining industries rebounded by 1% MoM in Oct. Extraction of coal andferrous metals grew by 1.6% and 5.3%, while the mining of crude oil & gasand non-ferrous metals dropped. PPI of raw material sectors stayedunchanged in Oct while processing sectors rebounded by 0.1%. NBSofficials pointed out that YoY price contraction has notably narrowed inmajor anti-involution targeted sectors including photovoltaic equipment,batteries and vehicles. Downstream sectors remained subdued as PPI ofconsumer goods dropped 0.1% MoM. Durable goods and clothing dropped0.3% and 0.1% in Oct respectively, while daily essentials notably reboundedby 0.7%.
Demand-driven reflation will be essential for sustaining a moreconsistent price recovery. We have seen a mild price reflation since the anti-involution campaign as supply containment prompted an instantrebound in upstream prices. Service prices also rose as spending shiftedtoward smaller-scale and self-indulgent spending. Meanwhile, durablegoods and property sales remained subdued, which would cast doubt on thesustainability of the price reflation. We believe demand-driven reflation islikely to prove more sustainable than supply-induced price increases, whichmay encourage policymakers to enhance fiscal support for households andthe real estate sector in 4Q25 to reinforce the ongoing price recovery andbroader economic growth. We expect 10bps LPR cut and 50bps RRR cutby the central bank in Nov or Dec. 机构：招银国际证券有限公司 研究员：Frank Liu/Bingnan YE 日期：2025-11-10
CPI notably rebounded thanks to recovering core CPI and food price.
China’s CPI YoY recovered to 0.2% in Oct from -0.3% in Sep, above marketexpectation at -0.1%. The drag from food narrowed to -2.9% YoY in Oct from-4.4%. In sequential terms, CPI rebounded to 0.2% from 0.1% in Sep. Foodprice increased by 0.3% MoM in Oct, as vegetable price rebounded by 4.3%,while pork price further dropped 2.5% in Oct. Vehicle fuel price dropped0.8% MoM due to declining crude oil price. We expect the CPI to recover to0.5% YoY in Nov due to lower base last year. High frequency data indicatedthe pork and vegetable prices were rebounding in early Nov while gas priceremained subdued.
Core CPI continued to pick up as consumer demand for servicesgradually recovered. Core inflation edged up to 1.2% YoY in Oct from 1%in Sep. Its MoM growth rose to 0.2% from 0%. Service price rose to 0.2%MoM in Oct, as tourism price expanded by 2.5% thanks to the nationalholiday. Prices of hotel accommodation, airline tickets and tourism notablysurged. Medical and home services also saw 0.5% and 0.1% MoM growthwhile education, express and telecom services saw no change. Durablegoods remained subdued, as home appliances and vehicles both saw -0.1%drop in Oct, while telecom equipment remained unchanged. Discretionarygoods moderated as prices of clothing and footwear dropped to 0.1% and -0.1% from 0.7% and 0.8% in Sep.
PPI marked the first positive MoM growth in a year. YoY contraction ofPPI narrowed to -2.1% in Oct from -2.3% in Sep, beating the marketexpectations at -2.3%. The MoM growth saw the first positive reading in Octat 0.2% since Nov 2024. PPI of upstream sectors saw 0.1% growth asmining industries rebounded by 1% MoM in Oct. Extraction of coal andferrous metals grew by 1.6% and 5.3%, while the mining of crude oil & gasand non-ferrous metals dropped. PPI of raw material sectors stayedunchanged in Oct while processing sectors rebounded by 0.1%. NBSofficials pointed out that YoY price contraction has notably narrowed inmajor anti-involution targeted sectors including photovoltaic equipment,batteries and vehicles. Downstream sectors remained subdued as PPI ofconsumer goods dropped 0.1% MoM. Durable goods and clothing dropped0.3% and 0.1% in Oct respectively, while daily essentials notably reboundedby 0.7%.
Demand-driven reflation will be essential for sustaining a moreconsistent price recovery. We have seen a mild price reflation since the anti-involution campaign as supply containment prompted an instantrebound in upstream prices. Service prices also rose as spending shiftedtoward smaller-scale and self-indulgent spending. Meanwhile, durablegoods and property sales remained subdued, which would cast doubt on thesustainability of the price reflation. We believe demand-driven reflation islikely to prove more sustainable than supply-induced price increases, whichmay encourage policymakers to enhance fiscal support for households andthe real estate sector in 4Q25 to reinforce the ongoing price recovery andbroader economic growth. We expect 10bps LPR cut and 50bps RRR cutby the central bank in Nov or Dec. 机构：招银国际证券有限公司 研究员：Frank Liu/Bingnan YE 日期：2025-11-10
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