Domestic Economic Data - The first phase of anti-involution may lead to a decline in the operating rate of the midstream sector to levels seen in the past two years, with a noticeable adjustment already occurring [1][3] - Since July, the sales of commercial housing in 30 major cities have consistently been lower than last year [1][3] - The sharp drop in port throughput in the first week of August indicates the end of the export rush that began in July [1][3] Asset Market Insights - Liquidity may be approaching a short-term bottleneck, with DR007 currently at around 1.45%, indicating short-term pressure on liquidity-sensitive assets [1][3] - The market generally expects the Federal Reserve to restart interest rate cuts in the second half of the year, which may not be followed by China [1][3] - As the China-U.S. interest rate differential narrows and the PPI year-on-year bottoms out, domestic assets may shift from a barbell strategy to focus on inflation and domestic demand [1][3] Overseas Economic Developments - On August 7, Trump nominated Stephen Moore to the Federal Reserve Board, indicating a potential MAGA trend within the Fed, which could pave the way for future rate cuts [2][4] - Recent dovish statements from Federal Reserve officials suggest that if the July CPI meets market expectations, a hint of rate cuts may be given at the Jackson Hole global central bank meeting on August 21-23 [2][4] - The market has already fully priced in a 25 basis point rate cut at the September FOMC meeting [2][4] Trade and Inflation Data - In July, China's exports were valued at $321.78 billion, a year-on-year increase of 7.2%, while imports were $223.54 billion, up 4.1%, resulting in a trade deficit of $98.24 billion, which is a 14.93% increase year-on-year [9][10] - The CPI for July was flat year-on-year at 0.0%, while the PPI fell by 3.6% year-on-year, indicating ongoing deflationary pressures in the industrial sector [10] Monetary Market Overview - The overall liquidity remained loose, with the benchmark interest rate rising by approximately 0.09 basis points [12] - The average weekly value of DR001 decreased by 5.586 basis points to 1.3142%, while DR007 fell by 8.246 basis points to 1.4457% [13] - Government bond issuance pressure has significantly decreased, with a planned issuance of 351.43 billion yuan next week, down from 634 billion yuan this week [14]

Core Viewpoint - The article discusses the July inflation data, highlighting the unexpected performance of PPI and CPI, and suggests that PPI may have reached its bottom with potential for recovery in the coming months [3][6][11]. Group 1: PPI Analysis - PPI in July decreased by 3.6% year-on-year, which was below market expectations, primarily due to the impact of "anti-involution" policies and a lag in response to high-frequency price increases [3][11]. - The decline in PPI was influenced by seasonal factors and international trade uncertainties, which affected prices in several industries, leading to a 0.24 percentage point drag on PPI [5][34]. - The article anticipates that the PPI year-on-year decline cycle, which began in October 2021, may have ended, with a potential second recovery phase starting next month due to favorable low base effects from last year [6][16][18]. Group 2: CPI Insights - CPI showed a year-on-year growth of 0% in July, aligning with the five-year average, while core CPI increased by 0.8% [4][22]. - Key contributors to CPI included a seasonal increase in housing rental demand, with rents rising by 0.1%, and improvements in durable goods prices, particularly in transportation and household appliances [4][25]. - The core service prices rose approximately 1.1%, driven by increased travel and medical service costs during the summer season [4][27]. Group 3: Economic Indicators - The economic cycle indicator, "the difference in growth rates between corporate and household deposits," has been rising for six consecutive months, suggesting improved consumer sentiment and economic recovery, which may positively influence PPI [7][17]. - The article notes that while PPI may not turn positive this year, the ongoing "anti-involution" policies are expected to gradually improve market conditions and pricing [8][19]. Group 4: Price Trends and Market Dynamics - The proportion of CPI items experiencing price increases rose seasonally, indicating a recovery in price dynamics [38]. - The proportion of industries with rising PPI prices slightly increased, reflecting a gradual improvement in market conditions [39][42]. - The article emphasizes that the ongoing optimization of domestic market competition is contributing to a narrowing of price declines in several sectors, including coal, steel, and solar energy [5][35].