China Galaxy Securities: This month's PPI continues to be at a low level compared to the same period last year.

A research report from China Galaxy Securities stated that this month's Producer Price Index (PPI) continued to be at a low level for the year, and the improvement in PPI may be limited in the future, making it difficult for PPI to turn positive for the year. The first reason is that the real estate market is still weakening, with local land revenue lower than expected leading to infrastructure investment falling short of expectations. The real estate market has been weakening since the second quarter, with a cumulative year-on-year decrease of 3.5% and 5.5% in sales area and sales volume of commercial housing in the first 6 months. High-frequency data shows that in July, the transaction area of commercial housing in 30 large and medium-sized cities decreased by -18.6% year-on-year, compared to -8.4% in June. The second reason is that there is insufficient momentum in microeconomic entities, with weak business investment and consumer consumption intentions. The third reason is that the capacity utilization in the manufacturing industry continues to be at a low level, and the continuous optimization of market competition order supports the improvement effect of PPI, which still needs to be observed. In the second quarter, China's industrial capacity utilization rate was 74%, showing a year-on-year and sequential decline, indicating weak demand. The continuous optimization of domestic market competition order is narrowing the price decline in related industries, but the improvement effect still needs to be observed.