Core Viewpoint - CITIC Securities predicts that under a neutral scenario, the year-on-year Producer Price Index (PPI) will record -2.9% and -2.0% in the third and fourth quarters of 2025 respectively [1] Group 1: PPI and CPI Trends - The "pig cycle misalignment" has led to a significant decline in the Consumer Price Index (CPI), with a year-on-year reading dropping to -0.4% [1] - In August, the impact of pork prices contributed to a decrease in CPI by approximately 0.24 percentage points [1] - The core CPI has been on an upward trend since April, with notable increases in prices for gold jewelry and durable consumer goods benefiting from trade-in subsidy policies [1] Group 2: Future Expectations - Looking ahead, the effects of the pig cycle misalignment are expected to gradually weaken starting in September, which will support improvements in future CPI year-on-year readings [1] - The CPI year-on-year reading is anticipated to show a significant rebound in the fourth quarter of 2025, with the highest point potentially reaching around 1.0% by the end of the year [1]

Core Insights - The July PPI improved on a month-on-month basis but remained unchanged year-on-year at -3.6%, slightly below market expectations, indicating a disconnect in price transmission from upstream raw materials to downstream industries [1][2] - The "anti-involution" policy has led to significant price increases in key commodities such as coal, steel, and lithium, but these increases have not effectively translated into higher industrial product prices [2][3] - The ongoing "pig cycle misalignment" has resulted in CPI slightly exceeding market expectations, driven by unexpected price increases in core goods, energy, and other services [5][6] PPI Analysis - The month-on-month PPI improved due to rising commodity prices, but the year-on-year figure did not show improvement, highlighting weak downstream demand and limited pricing power for enterprises [1][3] - The analysis framework indicates that while upstream raw material prices have improved, the PPI for downstream industries has continued to decline, particularly in the export chain [4] - The dual impact of supply-side policies and demand-side pressures is evident, with the export chain facing significant downward pressure [4] CPI Insights - The CPI for July was reported at 0.0% year-on-year, slightly above the expected -0.1%, driven by durable goods benefiting from trade-in subsidies and rising energy prices [5][6] - The increase in CPI was significantly influenced by the price hikes in gold and platinum jewelry, contributing approximately 0.22 percentage points to the overall CPI [5] - Expectations for CPI improvement are projected for September, considering the ongoing misalignment in the pig cycle and slow recovery in consumer spending [6] Market Implications - The bond market may experience low volatility as CPI and PPI figures align closely with market expectations, with a focus on inflation recovery and potential demand-side policies [7] - The overall economic environment remains sensitive to both domestic policy effectiveness and international trade dynamics, which could influence future market performance [7]