Yicai:

We have noticed that the CPI in February started to decrease year on year and month on month. What is the reason behind this? In addition, what is your view on the future trend of prices? Thank you.

Fu Linghui:

Thank you for your questions; price trends are of great concern to everyone. According to historical data, the Spring Festival has a significant impact on the CPI in January and February, especially when it falls in different months in two consecutive years, which can cause both year-on-year and month-on-month fluctuations. This is primarily due to the surge in purchases of goods and spending on services before and during the Spring Festival that drive up prices. After the Spring Festival, prices often decline as demand subsides. For instance, prior to the Spring Festival, it's common to see price hikes in food and transportation. However, once the holiday period ends and demand drops off, prices naturally decline. The Spring Festival falls in either January or February each year. When it falls in different months in two consecutive years, it typically causes noticeable fluctuations in the CPI.

In January this year, the CPI rose 0.5% year on year, a significant increase compared to the previous month due to the influence of the Spring Festival. In February, due to the shift in the timing of the Spring Festival, there was a year-on-year decrease of 0.7% in the CPI. This year, the Spring Festival fell in January, while last year, it was in February. After adjusting for the shift in the Spring Festival, February's CPI actually increased 0.1% year on year. It's also worth noting that the year-on-year decline in fresh vegetable prices and automobile discounts in February reduced the CPI growth rate. Due to a high base in the same period last year, when devastating snowstorms in some areas caused vegetable prices to surge, fresh vegetable prices in February this year fell 12.6% year on year, reducing the CPI by about 0.31 percentage point. In February, gasoline and new energy vehicle prices fell by 5% and 6%, respectively, collectively lowering the CPI by approximately 0.16 percentage point year on year. Overall, the CPI's moderate upward trend remains unchanged.

From the perspective of the CPI structure, as market demand improved, prices for some goods and services in February saw steady increases. In February, the prices of industrial consumer goods excluding energy rose 0.2% year on year. Among these, prices for cultural and entertainment durable goods, clothing, communication devices, and small household appliances increased by 1% to 1.6%. Certain service sector prices showed steady growth in February, with housekeeping services prices rising 2.6% year on year and dining-out prices increasing 1.2%. These trends reflected the impact of improved market demand on prices.

Looking ahead, China's supply of industrial and agricultural consumer goods remains ample, and the overall service supply is stable, providing a solid foundation for maintaining price stability. As the economy continues to recover and grow, market demand is expected to expand further. The overall price situation is expected to gradually improve due to efforts to promote income growth through multiple channels, increase high-quality goods supply, improve the consumption environment and enhance consumer goods trade-in programs. Thank you.