In April 2025, China’s Industrial Producer Price Index (IPPI) reported a year-on-year decrease of 2.7%. The index also showed a month-on-month decline of 0.4%. Over the first four months of the year, the average IPPI and the Industrial Producer Purchase Price (IPPP) both fell by 2.4% compared to the same period in 2024. The continuous decline in industrial prices reflects underlying trends in the broader economy, highlighting challenges in key sectors such as manufacturing and raw materials.
Key Factors Behind the IPPI Decline
1. Production Materials’ Price Decline
The main driver behind the drop in industrial producer prices was the decline in production materials. In April, production material prices fell by 3.1% year-on-year, contributing a substantial 2.28 percentage points to the overall decrease in industrial producer prices.
- Mining Sector: Prices in the mining industry fell by 9.4% year-on-year, a significant drop driven by reduced demand and global supply chain disruptions.
- Raw Materials Sector: The price of raw materials dropped by 3.6%, which points to a cooling in global industrial demand, particularly in sectors such as construction and infrastructure development.
- Processing Industry: The processing industry saw a 2.3% decrease in prices, reflecting slower growth in manufacturing activities and reduced production costs.
2. Living Materials Price Decline
The living materials sector also experienced a year-on-year price decline of 1.6%, contributing 0.40 percentage points to the overall fall in producer prices. Notable subcategories include:
- Food Prices: Food prices saw a modest decline of 1.4% year-on-year, influenced by factors such as reduced raw material costs for food production.
- Durable Goods: Prices for durable goods, including household appliances, decreased by 3.7%, reflecting the pressures in consumer demand and market oversupply.
- Non-Durable Goods: There was a slight uptick in the price of non-durable goods, which rose by 0.6%, driven by rising demand in sectors like personal care and hygiene products.
Industrial Producer Purchase Prices (IPPP) Trends
The Industrial Producer Purchase Price (IPPP), which tracks the prices of raw materials and inputs purchased by industrial producers, also showed a downward trend in April. Key details include:
- Fuel and Energy: Fuel and energy-related materials saw the most significant price drop, falling by 7.7% year-on-year. This was primarily due to reduced global energy demand and adjustments in international energy prices.
- Ferrous Metals: The price of ferrous metals decreased by 6.7%, reflecting a cooling demand from key sectors such as construction and manufacturing.
- Chemical Raw Materials: Chemical raw materials saw a 4.1% price decline, impacted by reduced demand in both domestic and export markets.
- Agricultural Products: Agricultural products experienced a 2.9% price decline, indicating weak demand and price fluctuations in raw food production.
However, some categories did experience price increases:
- Non-Ferrous Metals: Prices for non-ferrous metals, including copper and aluminum, rose by 8.5%, driven by growing demand from industries such as electronics and automotive manufacturing.
Month-on-Month Changes in April
While the year-on-year decline in industrial producer prices was notable, the month-on-month changes for April were more modest:
- Production Materials: The prices of production materials saw a 0.5% month-on-month decline, with mining prices down 2.1%, raw materials falling 1.0%, and processing industry prices reducing by 0.2%.
- Living Materials: The prices of living materials saw a slight decrease of 0.2%, with food prices down by 0.1%, and durable goods experiencing a 0.7% decline.
Key Contributions to the IPPP Month-on-Month Drop:
- Fuel and Energy: The fuel and energy sectors saw the most significant month-on-month decrease, with prices dropping 2.3%. This reflects global energy price adjustments following a period of high volatility.
- Chemical Raw Materials: The prices of chemical raw materials saw a 0.7% decline, contributing to the overall decrease in the IPPP.
- Ferrous Metals: Ferrous metal prices also dropped 0.6%, driven by ongoing concerns about global steel demand.
On the other hand, there were small increases:
- Non-Ferrous Metals: The prices for non-ferrous metals increased by 0.7%, driven by higher demand in sectors like technology and construction.
Conclusion: A Cooling Industrial Economy
The overall decline in industrial producer prices across various sectors, including production materials and living goods, signals ongoing challenges in China’s industrial sector. Weaker demand, both domestically and globally, is impacting key industries like mining, manufacturing, and chemical production. The continued price pressure, particularly in fuel and raw materials, also points to broader economic factors such as weak demand and reduced global commodity prices.
However, some sectors, particularly non-ferrous metals, show resilience, suggesting that demand remains strong in certain industries like electronics and renewable energy.
As China navigates these economic pressures, the overall industrial price trend in the coming months will depend heavily on global economic recovery, energy markets, and domestic demand for industrial goods.
