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June inflation data shows "reflation" paused, Deutsche Bank focuses on upstream pressure transmission (Deutsche Bank)

2026-07-11·ima-daily5min-0711-09-ecab84c627

Street Signal | June inflation data shows "reflation" paused, Deutsche Bank focuses on upstream pressure transmission (Deutsche Bank)

The June China Macro Inflation Monitoring Report released by Deutsche Bank showed that inflation momentum has paused and diverged. The CPI in June was 1.0% year-on-year, and the PPI rose to 4.1%.

The core chart of the report shows that the upstream (mining, raw materials) inflation pressure is huge, but the transmission to downstream consumer goods is very limited.

For example, coal mining prices surged 6.3% month-on-month, but prices in industries such as computers and electronic equipment only increased 0.1% month-on-month, and prices in most downstream industries (such as textiles, food, and automobiles) remained unchanged month-on-month.

This reveals a core contradiction: profits of midstream and upstream companies may be squeezed, while downstream consumer demand remains weak, limiting companies' ability to raise prices.

The market has already recognized structural inflation, but if upstream prices continue to be high and lead to a deterioration in midstream manufacturing profit margins, it will become a new risk point.

One-sentence conclusion: China's current economy is showing an extremely differentiated pattern of "overheating in the upstream and deflation in the downstream", which will pose a test to the profitability of the midstream manufacturing industry, rather than the benefit of overall inflation.

Good/bad: Good for the upstream resource sector (such as coal, non-ferrous metals); bad for the upstream manufacturing industry (such as chemical industry, papermaking, auto parts). The market has already expected structural problems, but the continued widening of the PPI-CPI scissor gap may exceed expectations. Catalysts:

1) PPI and CPI data in subsequent months to see whether the scissor gap narrows; 2) whether the government will introduce policies to regulate upstream prices; 3) whether downstream consumer goods companies can successfully achieve price increases.

Full text

June inflation data shows "reflation" paused, Deutsche Bank focuses on upstream pressure transmission (Deutsche Bank)

The June China Macro Inflation Monitoring Report released by Deutsche Bank showed that inflation momentum has paused and diverged.

The June China Macro Inflation Monitoring Report released by Deutsche Bank showed that inflation momentum has paused and diverged. The CPI in June was 1.0% year-on-year, and the PPI rose to 4.1%. The core chart of the report shows that the upstream (mining, raw materials) inflation pressure is huge, but the transmission to downstream consumer goods is very limited. For example, coal mining prices surged 6.3% month-on-month, but prices in industries such as computers and electronic equipment only increased 0.1% month-on-month, and prices in most downstream industries (such as textiles, food, and automobiles) remained unchanged month-on-month. This reveals a core contradiction: profits of midstream and upstream companies may be squeezed, while downstream consumer demand remains weak, limiting companies' ability to raise prices. The market has already recognized structural inflation, but if upstream prices continue to be high and lead to a deterioration in midstream manufacturing profit margins, it will become a new risk point. One-sentence conclusion: China's current economy is showing an extremely differentiated pattern of "overheating in the upstream and deflation in the downstream", which will pose a test to the profitability of the midstream manufacturing industry, rather than the benefit of overall inflation. Good/bad: Good for the upstream resource sector (such as coal, non-ferrous metals); bad for the upstream manufacturing industry (such as chemical industry, papermaking, auto parts). The market has already expected structural problems, but the continued widening of the PPI-CPI scissor gap may exceed expectations. Catalysts: 1) PPI and CPI data in subsequent months to see whether the scissor gap narrows; 2) whether the government will introduce policies to regulate upstream prices; 3) whether downstream consumer goods companies can successfully achieve price increases.

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