US Macro - The CPI rose by 0.3% in December, meeting expectations, with a year-on-year increase of 2.7%, unchanged from November. The core CPI increased by 2.6%, slightly below the expected 2.7% [6][28] - The overall CPI increase was primarily driven by food prices, which rose by 0.7% in December, marking the largest increase since 2022. Energy prices also saw a slight increase, but gasoline and fuel prices declined [6][8] - The US is likely at the forefront of low inflation globally, with core inflation remaining below the Fed's 2% target for the second consecutive month and lower than the average in most developed markets [7][35] - Tariff-related core goods inflation has shown a clear cooling trend since peaking in September 2025, indicating that the impact of tariffs on inflation has passed its peak and continues to be lower than expected [7][35] - Service inflation remains dominant, with housing prices rising by 0.4% in December, the largest increase since August 2025, contributing significantly to the overall CPI [8][35] CPI and PCE Differences - The Federal Reserve's long-term inflation target is set at 2% annual growth in PCE, making it the primary benchmark for monetary policy, while CPI is more commonly referenced in short-term market reactions [30][18] - PCE has broader coverage than CPI, including government and employer-paid healthcare, which is not reflected in CPI, aligning better with GDP accounting [30][18] - The market typically focuses more on CPI due to its earlier release and historical familiarity, while the Fed uses PCE for long-term trends [21][30]

Consumption - The consumption market shows a divergence between goods and services, with service consumption, particularly travel, experiencing a surge during the summer[2] - In the automotive sector, wholesale and retail sales increased compared to the previous week, with year-on-year growth rates also improving[4] - Food prices have seen a decline, with agricultural product prices dropping, while the price of Moutai liquor fell by 1.1% week-on-week[4] Investment - Special bond issuance accelerated, with a cumulative issuance of CNY 2.6 trillion by July 19, 2025, marking the highest issuance for the same period since 2020[18] - New home sales in 30 cities continued to decline seasonally, with a year-on-year drop of 25.7%, while the proportion of second-hand homes rose to a historical high of 72%[18] Trade - The Baltic Dry Index (BDI) surged by 29.9% week-on-week, driven by increased shipments of Brazilian iron ore and tight shipping capacity[21] - Port operations have become more frequent, with the number of ships docking for imports and exports increasing compared to the previous week[21] Production - Overall production is improving, with electricity demand rising due to high temperatures, and industries such as steel, petrochemicals, and automobiles showing increased operating rates[23] - The operating rate for PTA and polyester has also risen, indicating a recovery in the petrochemical sector[26] Prices - The Producer Price Index (PPI) and Consumer Price Index (CPI) are both showing marginal increases, with industrial prices rising by 1.2% week-on-week[37] - The price of carbon lithium has increased by 4.5% week-on-week, while prices for PTA and polyester continue to decline[37] Liquidity - The US dollar index rose by 59 basis points, surpassing 98 points, reflecting the resilience of the US economy[40] - The central bank's net liquidity injection was CNY 13.011 trillion, maintaining a reasonable level of liquidity in the market[39]