Date: Feb 20, 2025
In January, due to the Spring Festival holiday and seasonal factors, industrial production entered an off-season, with the Producer Price Index (PPI) declining month-on-month. However, service and food prices rose significantly affected by the timing of the holiday, along with a rebound in gasoline prices, collectively driving an expansion in the Consumer Price Index (CPI) year-on-year growth. Overall, despite signs of moderation, economic activity remains on a positive trajectory, underscoring the need to expedite the implementation of supportive measures
Economic Growth Moderates, but Certain Sectors Gain Momentum
In January, the Composite Purchasing Managers’ Index fell by 2.1 percentage points month-on-month to 50.1%, reflecting impacts from the Spring Festival holiday and the return of employees to their hometowns. This indicates a broad-based slowdown, though overall economic expansion persists. Driven by the Spring Festival effect, sectors related to residents' travel and consumption—such as road transportation, accommodation, catering, ecological protection, and public facility management—saw their Business Activity Indexes rebound into expansionary territory, signaling greater market vitality. Meanwhile, sectors including air transport, postal services, telecommunications, broadcasting, satellite transmission, and monetary financial services maintained robust Business Activity Indexes above 55.0%, sustaining rapid growth in output.
Surge in Aggregate Social Financing
In January, total social financing increased by 7.06 trillion yuan, up by 586.6 billion yuan compared to the same period last year. Financial institutions issued 5.13 trillion yuan in new RMB loans (including loans to non-bank financial institutions), a year-on-year increase of 210 billion yuan. Structurally, the surge was driven by government bonds and corporate financing, while household borrowing remained weak. Corporate financing hit record highs, with medium- and long-term loans growing further despite a high base. The demand for household short-term loans remained low, likely due to the timing of the Spring Festival. Additionally, the reduced demand for business loans to refinance existing mortgages, following cuts in mortgage rates, weighed on medium- to long-term business loans.
Property Market Prices See Divergent Trends
In January, housing prices in first-tier cities continued to rise month-on-month, whereas second- and third-tier cities saw slight declines, reflecting a clear divergence in trends. Specifically, new home prices in first-tier cities increased by 0.1% month-on-month, though the rate of growth slowed by 0.1 percentage point compared to December. In second-tier cities, new home prices rose by 0.1%, marking the first increase since June 2023, while third-tier cities saw a 0.2% decline. For existing homes, first-tier prices edged up by 0.1%, a 0.2 percentage point slowdown from December, second-tier prices dropped by 0.3%, and third-tier prices fell by 0.4%. Year-on-year, price declines narrowed across all city tiers, suggesting gradual stabilization.
Core Consumption Recovery Emerges as Economic Stabilizer
In January, industrial production remained subdued due to the holiday, with the PPI falling by 0.2% month-on-month and 2.3% year-on-year—unchanged from the previous month's annual decline. Prices in non-ferrous metal mining and processing saw significant increases, while ferrous metal smelting, coal mining, and related industries accounted for nearly 90% of the PPI’s annual decline, contributing 2.11 percentage points. The CPI, however, expanded year-on-year, fueled by holiday-driven service and food price surges along with higher gasoline prices. Notably, the core CPI (excluding food and energy) rose for the fourth consecutive month, climbing 0.5% month-on-month and 0.6% year-on-year, with both growth rates accelerating from December.
