CITIC Securities: June PPI YoY May Have Peaked, Profit Under Pressure in H2
Alina Collins
CITIC Securities says June PPI rose to +4.1% year-on-year but has likely peaked for this cycle, with month-on-month turning negative at -0.3% on falling oil prices — pointing to downside risk for industrial profit growth in H2.
PPI hit +4.1% year-on-year — why call it the top?
June PPI came in at +4.1% year-on-year, in line with consensus, but the reading was propped up mainly by a low base from the same period last year.
Month-on-month already turned negative at -0.3% — prices are actually falling. The strong year-on-year figure is a math effect of "last year was too low."
This means → the 2025 PPI base runs low early, high later; as the denominator rises in H2, the year-on-year number will naturally drift down.
In plain terms = PPI year-on-year is like measuring height from the bottom of a ditch — the climb out is over, and the ground ahead is flat.
What dragged month-on-month into negative territory?
Falling crude prices were the biggest drag: oil-and-gas extraction PPI fell -11.8% month-on-month, chemicals -2.0%, fuel processing -1.9%, synthetic fiber -0.8%.
Together, these four sectors pulled PPI month-on-month down by 0.3 percentage points — essentially the entire decline.
Coal mining, electronic-equipment manufacturing, and ferrous-metal smelting partially offset the drop, adding roughly +0.24 percentage points combined.
This means → without coal and electronics holding the line, the month-on-month decline would have been deeper.
Why did CPI miss expectations? What is core CPI signaling?
June CPI came in at +1.0% year-on-year, roughly 0.2 percentage points below both the Wind consensus and the prior month.
Two main drags: gold-jewelry prices fell 8.7% and gasoline prices fell 4.9%, together pulling CPI month-on-month down by about 0.22 percentage points.
Core CPI — consumer prices excluding food and energy — has slipped for two straight months: 1.2% in April → 1.1% in May → 1.0% in June.
This reflects still-weak domestic demand recovery; consumer-side pricing power is fading, not building.
Which consumer sub-items are strong, which are weak?
Stronger: healthcare-services CPI ran 0.22 pp above its historical seasonal average month-on-month; telecom devices ran 0.84 pp above — both supported by non-discretionary demand and device-replacement cycles.
Weaker: tourism lagged its seasonal norm by 0.06 pp, alcohol by 0.20 pp, household appliances by 0.36 pp.
In plain terms = spending people must do (doctor visits, phone upgrades) still rises; spending they can skip (travel, drinks, appliances) is shrinking.
What does this mean for corporate profits in H2?
CITIC Securities compares this round of imported inflation — price rises transmitted through raw-material imports — to the 2021–2022 cycle, but notes that both domestic and external demand are weaker now.
The PPI-CPI scissors gap (PPI rising far faster than CPI, meaning input costs surge while selling prices cannot keep up) is likely to stay wide for some time.
This means → industrial-profit growth is expected to follow an "up first, down later" pattern, with clear downside pressure in H2.
How did the bond market react, and what comes next?
After the data release, the 10-year government bond benchmark yield rose 0.4 basis points quickly; CITIC Securities reads this as a brief market pricing of continued PPI year-on-year gains.
But the move was limited — until core CPI shows a better-than-expected improvement, bond-market inflation pricing has little room to add more.
This means → the key checkpoint for H2 is whether PPI year-on-year enters a downward channel on schedule. If it does, profit pressure stays manageable and bonds stay stable; if it doesn't, both sides will need to reprice.
Content is for reference only, not financial advice.