CPI, PPI show stabilization tendencies

China's consumer and factory-gate prices showed further signs of stabilization in September, as recovering domestic demand, industrial upgrading and policy support helped narrow price declines and strengthen underlying inflation momentum, analysts said on Wednesday.

The National Bureau of Statistics said the consumer price index, the main gauge of inflation, fell 0.3 percent year-on-year in September, following a 0.4 percent drop in August.

The core CPI, which excludes volatile food and energy prices and is deemed a better gauge of the supply-demand situation, increased 1 percent year-on-year in September, up from a 0.9 percent rise in August, according to the NBS.

Wen Bin, chief economist at China Minsheng Bank, said prices continued a recovery trend in September, thanks to the release of consumption potential, industrial upgrading and the continuous optimization of market competition order.

"The core CPI continued to improve, with year-on-year growth expanding for the fifth consecutive month, returning to 1 percent for the first time in 19 months. Meanwhile, the year-on-year decline in factory-gate prices narrowed for the second straight month, performing better than market expectations. This reflects an improvement in supply and demand conditions," Wen said.

NBS data showed China's producer price index — which measures factory-gate prices — fell 2.3 percent year-on-year in September, easing from a 2.9 percent drop in August.

Looking into full year 2025, Wen said China's CPI will "show mild recovery from a low level", with full-year growth likely at 0.1 percent.

"In the first nine months, the CPI fell 0.1 percent year-on-year, with food prices being the main drag due to oversupply of pork and eggs, while energy prices remained weak amid global oversupply," he said. "As policies to expand domestic demand and boost consumption take effect, market supply and demand will gradually improve, with consumer goods and services prices increasing steadily."

On producer prices, Wen said the PPI's year-on-year decline will narrow in the second half, adding that policy efforts to curb cutthroat competition have begun to improve domestic competition and reduce price pressures.

Wen's views were echoed by Chen Guowen, an analyst at LC Securities, who said that the initiative to curb overheated competition will help improve supply, while the wealth effect from the stock market will drive demand. "Price levels are expected to see a mild increase in the coming months."

China's policymakers have made solid steps to further curb disorderly price competition. In a joint notice released last week, the National Development and Reform Commission and the State Administration for Market Regulation stressed that China "supports fair, open and lawful market competition".

Xiao Qiaowei, head of Sany's emergency equipment research institute, said the emergency equipment sector has become increasingly competitive in recent years. "Since 2022, we've seen trends similar to the 'price wars' in the auto industry. We are concerned that excessive price-cutting could come at the expense of quality."

Xiao is eager to see more rational and healthy competition across the industry. "We hope the government and industry associations can help foster a fairer, competitive environment. The bidding and tendering system should be adjusted to better reflect product quality, not just price."