Matters:
In January 2022, the year-on-year CPI was 0.9%, and the year-on-year PPI was 9.1%.
Ping An View:
In January, CPI fell year-on-year, and the upward range month on month was weaker than the seasonal law; Excluding food and energy, the core CPI was flat year-on-year. Most of the month on month changes of items related to food, tobacco and alcohol and optional consumption were weaker than the seasonal law, dragging down the year-on-year growth rate of CPI; The traffic and communication sub items went up seasonally, but failed to fully offset the drag of other projects. Specifically: first, the upward trend of food, tobacco and alcohol items is weaker than seasonality, which is mainly dragged down by the weaker than seasonality of the price change of pork and fresh vegetables. Second, clothing, daily necessities, entertainment, culture and education, medical care and other optional consumption related items are weaker than the seasonal law. The multi-point spread of the epidemic in China and the weak marginal consumption propensity of residents continue to suppress the recovery of optional consumption. Third, transportation and communication rose on a supraseasonal basis, mainly due to the increase in residents' travel and communication demand during the Spring Festival and the rise in international energy prices.
The PPI reading in January was 9.1% year-on-year, falling for three consecutive months from the historical high; The month on month decline was 0.2%. In January, PPI fell by 1.3 percentage points year-on-year, slowing down from 2.6 percentage points last month. On the one hand, the sharp rise in international oil prices and non-ferrous metal prices led to the upward growth of petrochemical industry chain and non-ferrous related industries; On the other hand, the price decline of China's coal, steel and other industries is slowing down. Specifically:
1) in the means of production, the industrial breakdown of raw materials was boosted by the rise in the prices of oil, natural gas, iron ore and other products. Mining and processing industries fell month on month, reflecting the impact of the early implementation of the policy of ensuring supply and price stability of coal and weak demand for steel. 2) In the means of subsistence, food prices fell month on month, the prices of general daily necessities were flat month on month, and the prices of clothing and durable consumer goods rose month on month. With the decline of the prices of the upstream means of production, especially the processing industry, the cost of industrial products related to residents' consumption tends to fall. Superimposed on the weakness of downstream consumption, it is unlikely that the price items of means of living will continue to rise. 3) By industry, the PPI of coal mining, ferrous metal processing and non-metallic mineral products fell month on month in January, and the industries with higher month on month growth were concentrated in the oil, nonferrous metals and public utilities sectors.
In the first half of 2022, inflation is not a "tight constraint" on monetary policy, but the structural inflation risk caused by rising oil prices deserves attention. 1) In terms of CPI, although the fluctuation of crude oil and natural gas prices has disturbed energy related projects, the core CPI is still relatively low dragged down by demand, and the price of pork is likely to bottom twice under the imbalance between supply and demand. It is expected that the year-on-year growth rate of CPI from February to March will hover around 1%, and the upward range in the first half of the year is still moderate. 2) In terms of PPI, in the next quarter, the international oil price, coal and electricity market-oriented reform, and the expected rise in infrastructure may slow down the decline of PPI. However, considering the influence of tail warping factors, the year-on-year growth rate of PPI in the first half of the year still tended to fall. We believe that in the first half of 2022, the focus of monetary policy operation will shift to "escort" of credit easing. In view of the structural inflation risk and the potential impact of the Fed's monetary tightening, the central bank may pay more attention to the use of structural tools. There is still room for RRR reduction to make up for the gap in the base currency. If the risk of economic slowdown is not eliminated and the credit quality is insufficient, there is still the possibility of fine-tuning the policy interest rate.
