Event:
1) CPI was 0.9% year-on-year, the previous value was 1.5%, and the market expectation was 1.1%; CPI was 0.4% month on month, with the former value of - 0.3%; 2) Core CPI was 1.2% year-on-year, with the previous value of 1.2%;
3) PPI was 9.1% year-on-year, the former value was 10.3%, and the market expectation was 9.2%; PPI was - 0.2% month on month, and the previous value was - 1.2%.
Core view:
CPI fell more than expected in January, which is related to weak terminal demand and over seasonal decline in food prices. The year-on-year growth rate of PPI continued to decline in January, which is related to the continuous effect of China's policy of ensuring supply and stabilizing price under the background of high base, and the weak demand of the construction industry before the festival.
Looking ahead, it is expected that the year-on-year growth rate of CPI in the first quarter is still at a low level, and it will enter the upward channel after the second quarter. The year-on-year growth rate of PPI is expected to continue to decline during the year. At the same time, under the rising pressure of raw materials in the early stage, the middle and downstream consumer goods industry continues to raise prices, and the profits of middle and downstream enterprises are expected to accelerate the repair in the future.
In January, CPI fell more than expected, further down to 0.9% year-on-year from 1.5% last month, lower than 1.1% expected by the market. Among them, food prices rose to 1.4% month on month (MOM) in January from - 0.6% in the previous month, but weaker than the seasonal performance (the average value of January 2014, 2017 and 2020 of the same spring festival in January was 3%), mainly related to the decline of pig prices and the moderate increase of vegetable prices. Non food CPI rose to 0.2% month on month (MOM) in January from - 0.2% last month, which is related to the rise in international oil prices, the increase in travel before the festival and the increase in demand for returning home. In January, the sub item of vehicle fuel increased to 2.2% month on month (MOM) from - 5.2% last month, and the service price increased from flat to 0.3% last month.
Compared with the Spring Festival in January, the current problem of insufficient terminal demand is still prominent, and the demand for goods and services is weak. The core CPI in January was 0.1% month on month, which was lower than the seasonal performance (the average value in January 2014, 2017 and 2020 was 0.5%). Among them, the prices of housing, daily necessities, education and entertainment and medical services were weaker than the seasonal performance, and only the clothing price was in line with the seasonal performance. This is related to the repeated impact of the epidemic on offline consumption in January and the high willingness of residents to save.
The month on month decline of PPI narrowed, the year-on-year growth rate continued to fall, and the upstream and downstream prices rose and fell. Among them, the month on month decline in the price of means of production narrowed, which is related to the recovery of international crude oil and nonferrous metals prices. The prices of coal, steel and building materials in China continued to fall. On the one hand, the effect of China's policy of ensuring supply and stabilizing prices continues to show. In addition, as January approaches the Spring Festival, the demand of the construction industry is weak, and the prices of coal, steel and cement continue the downward trend since December. On the other hand, with the gradual convergence of the impact of the Omicron mutant strain and the continuous recovery of overseas demand, under the background of tight supply and low inventory, the international crude oil and nonferrous metals prices have turned up, driving China's prices to pick up synchronously. In terms of means of living, the prices of clothing and durable goods have turned positive month on month, and the manufacturing prices of general daily necessities and food have continued to rise month on month. It can be seen that the rising pressure of raw materials in the early stage is gradually transmitting to the downstream.
Looking ahead, CPI in the first quarter was still at a low level year-on-year, and entered the upward channel after the second quarter. Since pork has entered the off-season of consumption after the Spring Festival, and the supply of pigs is still at an all-time high, the pig price in the first quarter is in a situation of easy decline and difficult rise, which is a drag on CPI. After the second quarter, with the gradual approach of the inflection point of pig supply, the price may rebound.
The contradiction between supply and demand of China's bulk commodities continues to ease, and the year-on-year growth rate of PPI is expected to continue the downward trend. With the steady progress of ensuring supply and stabilizing price in China and the weak real estate demand in the first half of the year, there is limited room for the rise of commodity prices in China. Driven by the high base effect, the PPI center is expected to fall to about 3% in 2022.
Under the rising pressure of raw materials in the early stage, the middle and downstream consumer goods industry continues to raise prices, and the profit space of the middle and downstream industries is gradually opening up. On a month on month basis, in the past three months, the prices of means of production have declined, while most of the prices of means of living have risen, indicating that the transmission of inflation is still continuing, and the profits of middle and lower reaches enterprises are expected to speed up the repair.
Risk warning: the international oil price is higher than expected; Covid-19 pneumonia spread on a large scale.
