CITIC Securities: It is expected that the point at which the year-on-year increase in the Producer Price Index (PPI) turns positive may be further advanced.

According to the research report of CITIC Securities, China's PPI and CPI in February both exceeded market expectations, with PPI and CPI exceeding Wind's consensus forecasts by 0.3 and 0.4 percentage points, respectively. In terms of PPI, the strong rise in prices of non-ferrous metals and crude oil brought about by input factors were the core driving factors for its better-than-expected performance, with chemical and electronics price hikes also performing well. It is estimated that in February, non-ferrous metal smelting, chemical, computer communications, and oil extraction each affected PPI to rise by 0.32, 0.08, 0.08, and 0.04 percentage points respectively month-on-month. On the CPI side, aside from the "Spring Festival displacement" factor, the rise in service industry prices, as well as the rise in crude oil and gold prices, are also core driving factors. With the current fluctuations in the US-Iran geopolitical situation, there may be continued upward momentum in oil prices. It is estimated that for every 1% increase in Brent oil prices, it may affect China's PPI to rise by about 0.04-0.05 percentage points, and affect CPI to rise by 0.01-0.02 percentage points. It is expected that the turning point for PPI on a year-on-year basis may be further advanced. In terms of monetary policy, it is expected that the People's Bank of China will not tighten monetary policy due to an increase in oil prices caused by supply shocks, and the more important factor is to observe changes in demand.