May PPI Drops 3.3 Percent Industrial Prices Under Pressure

In May 2025, China’s Producer Price Index (PPI) recorded a year-on-year decline of 3.3% and a month-on-month drop of 0.4%, according to data released by the National Bureau of Statistics. Meanwhile, input prices for producers fell by 3.6% year-on-year and 0.6% month-on-month.

Key Drivers Behind the Decline

1. Global Price Pressures:
   Falling international crude oil prices significantly impacted domestic petroleum-related industries. Oil and gas extraction prices dropped by 5.6%, refined petroleum products fell by 3.5%, and chemical raw materials and products decreased by 1.2%. These three sectors combined contributed to over half of the PPI's monthly decline, accounting for 0.23 percentage points.

2. Seasonal Weakness in Domestic Energy Demand:
   The off-season for coal consumption, coupled with adequate coal inventories at power plants and ports, led to a 3.0% drop in coal mining and washing prices and a 1.1% decline in coal processing prices. Additionally, high temperatures and rain in southern regions disrupted construction projects, driving black metal smelting and processing prices as well as non-metallic mineral product prices down by 1.0%. Together, these factors reduced PPI by approximately 0.18 percentage points.

Emerging Positive Trends

Despite the larger PPI decline compared to April, certain industries showed signs of recovery due to supportive macroeconomic policies:

• Consumer Goods Gaining Strength:
  Consumption-driven industries witnessed improvement, with living materials prices stabilizing after a 0.2% decline in April. Clothing prices rose by 0.2%, general daily goods by 0.1%, and durable consumer goods by 0.1%, narrowing the year-on-year decline in this category. Notably, crafts and ceremonial goods prices surged 12.8%, while shoe manufacturing rose 0.8%.

• High-Tech Manufacturing on the Rise:
  Advanced manufacturing posted robust growth. Prices for integrated circuit packaging and testing and aircraft manufacturing rose by 3.6%, while wearable devices increased 3.0%. Green energy sectors like photovoltaics and lithium batteries saw price declines narrow, reflecting improving market conditions.

From January to May, average producer and input prices both dropped 2.6% year-on-year, with chemical raw materials prices falling 4.1%.