In January 2022, CPI increased by 0.9% year-on-year (the market expected 1.1%), and the previous value was 1.5%. PPI increased by 9.1% year-on-year (market expectation was 9.2%), and the former value was 10.3%. Both CPI and PPI fell year-on-year.
I. CPI: insufficient consumption hinders growth
The year-on-year growth rate of CPI decreased significantly, and the month on month ratio changed from negative to positive. In January, the value of CPI decreased by 0.6pct compared with the previous month, and the month on month decrease of 0.3% turned to an increase of 0.4%. The core CPI excluding food and energy prices rose 1.2% year-on-year, the same as last month.
Insufficient consumer demand is the main reason for the decline of CPI year-on-year growth. Affected by the outbreak of the epidemic in many places, the reduction of residents’ consumption propensity and the severe employment situation, various consumption activities during the Spring Festival have not yet returned to the pre epidemic level. The business activity index of the consumer service industry fell 1.2pct to 49.8%, indicating that the momentum of consumption repair was weak, and the prosperity of industries such as transportation, accommodation and catering declined. In terms of travel, according to the statistics of the joint prevention and control mechanism of the State Council, 131 million passengers were sent throughout the country during the Spring Festival holiday, a year-on-year increase of 33.4%, but a decrease of 69.0% compared with the same period in 2019. In terms of tourism, according to the statistics of the Ministry of culture and tourism, 251 million Chinese tourists traveled during the Spring Festival holiday, accounting for 73.9% of the Spring Festival holiday in 2019; China’s tourism revenue was 289.2 billion yuan, 56.3% of the same period of the Spring Festival holiday in 2019. The weak recovery of consumption suppressed the prices of relevant goods and services, resulting in the continuous downturn of CPI growth.
Structurally, food prices are a drag on CPI. Food prices fell by 3.8% year-on-year in January, an increase of 2.6pct over the previous month, and the pull on CPI growth fell to -0.72pct. Among them, the prices of pork and fresh vegetables decreased year-on-year due to sufficient supply, while fresh fruits and aquatic products increased. In the future, as the Spring Festival consumption season comes to an end, food prices will continue to fall as a whole, and the pull on CPI will also be reduced. Non food prices were relatively stable, with a year-on-year increase of 2.0% in January, down 0.1 percentage points from the previous month, affecting the CPI to rise by about 1.64 percentage points, basically unchanged from the previous month. Due to the recent rise in crude oil prices in the international market, the national development and Reform Commission announced to raise the prices of refined oil on December 31 last year and January 17 and 29 this year, respectively. The prices of related products and services have played a supporting role in CPI.
Looking ahead, insufficient consumer demand will continue to restrain CPI. In the short term, the year-on-year growth rate of CPI will remain low, but it will fluctuate upward with the recovery of pork prices during the year.
II. PPI: continue to maintain the downward trend
The year-on-year and month on month growth of PPI continued to fall. In January 2022, the year-on-year growth rate of PPI decreased by 1.2pct to 9.1% compared with the previous value, and the month on month decline narrowed by 1.0pct to – 0.2% compared with the previous month, gradually returning to near zero from – 1.2% of the previous month. The decline in the year-on-year growth rate of industrial prices is characterized by the sequential transmission from upstream to downstream. The price decline of upstream mining industry was the most obvious, with a significant decrease of 9.2pct from 44.2pct to 35.0pct in the same month, which was mainly affected by the weakening of coal mining; The raw material industry took the second place, reducing 1.6pct from 19.7pct to 18.1pct, which was mainly affected by steel smelting; The processing industry had the smallest decline, from 8.2pct to 7.0pct.
The fall in the prices of coal and steel industries is the main reason for the decline in the prices of means of production. The price of means of production increased by 11.8% year-on-year, and the increase fell by 1.6pct, pulling PPI down by 1.3pct to 8.9pct. Under the joint influence of the steady progress of China’s policy of ensuring supply and price stability and the weak downstream real estate and infrastructure construction, the year-on-year growth rate of prices in coal and steel industries continued to fall, the year-on-year growth rate of coal mining fell sharply by 15.5pct, and that of ferrous metal smelting fell by 6.3pct, which reduced the pull on PPI accordingly. Secondly, affected by the rebound in international crude oil and non-ferrous metal prices, Petrochina Company Limited(601857) the year-on-year decline in price growth of relevant industries and non-ferrous metal smelting industry slowed down, forming a weak support for PPI year-on-year.
The year-on-year growth rate of means of subsistence remained stable, and the prices of various industrial products increased slightly year-on-year. In January, the price of means of subsistence increased by 0.8% year-on-year, down 0.2pct from the previous month, driving the year-on-year growth rate of PPI by 0.2pct, which was basically the same as that of the previous month. Among them, the year-on-year growth rate of industrial food decreased by 0.9pct, and the year-on-year growth rate of clothing increased slightly by 0.4pct to 0.5% and 1.4% respectively. The year-on-year growth rates of general daily necessities and consumer durables were 1.3% and 0.6% respectively, basically the same as that of the previous month.
Looking ahead, with the further promotion of China’s supply and price stabilization policy and the weakening of real estate, the year-on-year growth rate of PPI will continue to fall. Attention should be paid to the disturbance of international energy prices, especially oil prices in China. In addition, due to the rapid decline of industrial product prices, the ppi-cpi scissors difference continues to converge, and the profit distribution is gradually transmitted from upstream enterprises to middle and downstream enterprises.
