Event: CPI in November was 2.3% year-on-year, expected to be 2.5%, and the previous value was 1.5%; PPI was 12.9% year-on-year, 12% expected, and the previous value was 13.5%.
Core view: PPI and ppi-cpi scissors have peaked and fallen. The benchmark situation of next year is above and below CPI, focusing on upstream and downstream transmission.
1. CPI expanded significantly year-on-year, mainly due to rising costs, weather factors and low base. Itemized: the increase of food items increased month on month, pork and eggs changed from decline to rise, the increase of fresh fruits expanded, and the increase of fresh vegetables fell sharply. Non food month on month ratio changed from rising to flat, in which the increase in energy prices fell; Service prices have changed from up to down. In November, CPI rose 2.3% year-on-year, 0.8 percentage points higher than the previous value, of which the tail warping and new price rise factors affected 0.6 and 1.7 percentage points respectively; Food increased by 1.6% year-on-year from a decrease of 2.4%; Non food increased by 2.5% year-on-year, with an increase of 0.1 percentage points; Core CPI fell 0.1 percentage point year-on-year to 1.2%.
>The growth rate of food items increased month on month, which was significantly stronger than the seasonality. Most of the key Shenzhen Agricultural Products Group Co.Ltd(000061) prices rose, and the growth rate of vegetable prices fell significantly. In November, the month on month increase of CPI food items expanded by 0.7 percentage points to 2.4%, Significantly higher than the (seasonal) average of the same period in 2016-2019 by 0.1%; key Shenzhen Agricultural Products Group Co.Ltd(000061) Most of the prices rose, and the pork price changed from decline to rise, with a month on month increase of 12.2%, mainly due to the cold weather, the increased demand for curing enema and the tight supply of short-term fat pigs; Vegetable prices fell 9.8 percentage points to 6.8% month on month, mainly due to the strength of vegetable supply guarantee policy and the improvement of supply; Due to the influence of weather, seasonality and other factors, the prices of eggs and fresh fruits have increased.
>Non food chain from up to flat, in line with the seasonal law. In November, non food fell 0.4 percentage points month on month to the pre flat value, In line with the seasonality (the average value for the same period in 2016-2019 is 0.0%), in which the month on month increase of industrial consumer goods fell by 0.6 percentage points to 0.3%, and the fall in the price of energy products was the main drag, which reflected the impact of the decline in international oil prices; the month on month increase of service prices changed from increase to decrease, and the travel related prices fell sharply, mainly reflecting the disturbance of repeated local epidemics and reduced travel after the festival.
>The core CPI decreased slightly, and follow-up attention was paid to the transmission of industrial product prices (the upstream prices were still high) and the disturbance of the epidemic on service prices. The core CPI excluding food and energy fell by 0.1 percentage points to 1.2% year-on-year and 0.3 percentage points to – 0.2% month on month.
2. PPI fell as scheduled year-on-year, but still higher than market expectations, and the month on month ratio changed from rise to flat, mainly due to the strength of the policy of stabilizing prices and ensuring supply, and the rise in the prices of energy and raw materials narrowed. Among them, PPI industries were differentiated month on month, and the month on month growth of upstream mining, raw materials and midstream processing decreased significantly; The central and lower reaches increased month on month; Most of the subdivided industries continued to rise month on month, and the growth of energy and raw materials such as coal, fuel processing, black and nonferrous metals narrowed significantly. In November, PPI fell by 0.6 percentage points to 12.9% year-on-year, of which tail warping and new price rise affected 1.2 and 11.7 percentage points respectively; PPI fell 2.5 percentage points to flat compared with the previous value.
>In terms of means of production and means of living, the transmission from means of production to means of living is prominent. The value of means of production decreased by 3.4 percentage points to – 0.1% compared with the previous value, mainly due to the effect of supply guarantee policy in coal and metal industries; The month on month increase of means of living expanded by 0.3 percentage points to 0.4%, the highest monthly increase since the epidemic, reflecting that the upstream price rise in the early stage may be gradually transmitted to the downstream.
>In terms of seven industries: upstream mining and midstream processing have changed from up to down, the growth of raw materials has narrowed, and the growth of downstream industries has expanded. Specifically, upstream mining, raw materials and midstream processing decreased by 14.2, 3.5 and 2.1 percentage points to – 2.1%, 0.9% and – 0.3% respectively compared with the previous value; The downstream food, clothing and commodity processing industry rose by 0.6, 0.1 and 0.1 percentage points to 0.8%, 0.4% and 0.4% respectively compared with the previous value; Durable consumer goods were flat month on month (MOM), with the previous value of – 0.2%.
>Divided into 40 industrial industries: most of the subdivided industries are still rising month on month, but on the edge, the differentiation between upstream and downstream is intensified, and the upstream coal
The growth of energy and raw materials such as black, nonferrous metals, chemical industry and chemical fiber has narrowed significantly, and most of the growth in the manufacturing price of downstream consumer goods has expanded. 1) Coal fell sharply. Due to the joint intervention of multiple departments, the q5500 power coal price of Qinhuangdao Port fell 47.4% month on month in November, corresponding to the month on month growth rate of PPI coal mining and dressing industry, down 25 percentage points from the previous value to – 4.9%. 2) Oil prices changed from up to down. In November, due to the strategic reserve of crude oil put in by the United States, repeated epidemics and other factors, the oil distribution price changed from rise to fall, with a month on month decrease of 3.5%. However, PPI oil and gas exploitation, fuel processing, chemical industry and chemical fiber increased by 6.5%, 1.7%, 0.7% and 0.4% respectively, which deviated from each other. The main reason is that the basic data of PPI statistics comes from the data fed back by survey enterprises on the 5th and 20th of each month, PPI in related industries has not fully reflected the decline in oil prices at the end of November. 3) Steel prices changed from up to down, and the decline in iron ore prices expanded. Due to the impact of factors such as the off-season of consumption and the decline of real estate infrastructure, the spot price of rebar fell sharply by 16.5% month on month in November, driving the month on month growth rate of PPI ferrous metal smelting down 8.3 percentage points from the previous value to – 4.8%; In November, the month on month decline of iron ore expanded by 3.8 percentage points to 15.7%, but the decline of PPI black mining narrowed by 2.6 percentage points to 6.3%. 4) Natural gas prices rose sharply. In November, China’s natural gas spot price rose by 9.7 percentage points to 16.7% month on month, driving the supply of PPI gas production industry to expand by 2.8 percentage points to 4.1% month on month. 5) Trade
The policy effect of expanding the floating range of electricity price further appeared, and the increase of electricity price significantly expanded. The month on month increase of power and heat increased by 1.4 percentage points to 1.9%, which was significantly stronger than the seasonality (the average value in the same period of 2016-2019 was 0.2%), mainly because many places announced the increase of on grid electricity price after the expansion of the fluctuation range of market transaction electricity price.
3. Outlook: “CPI up and PPI down” is the benchmark situation in 2022, and the ppi-cpi scissors difference will continue to converge
>CPI: according to high-frequency data, the price of eggs and vegetables turned negative month on month in the first week of December, and the increase of pork and fruit prices narrowed. It is expected that the CPI food sub item may be flat or slightly lower in December; The high upstream prices of non food items are expected to continue to transmit to the downstream, but the scattered epidemic is a drag on service consumption. Therefore, it is expected that CPI in December may be flat or slightly lower month on month, and the year-on-year growth rate in December will also tend to decline under the high base. Maintain the annual judgment: CPI may fluctuate upward in 2022, the high point may exceed 3%, and the annual center is about 2.4%.
>PPI: according to high-frequency data, in the first week of December, Nanhua industrial products index fell by 1.1% month on month, CRB spot index fell by 1.7%, and crude oil, coal and rebar prices fell by 10.8%, 1.8% and 16.5% month on month respectively. In the future, considering that the real estate infrastructure is still weak, the shutdown in northern China in winter and the continuous development of supply guarantee policy, the PPI may turn negative month on month, the superposition base will rise, and the PPI may fall significantly in December. Maintain the annual judgment: PPI in 2022 tends to decline year-on-year as a whole, Q4 may turn negative under the drag of the high base, and the year-on-year of the whole year may fall from about 8% in 2021 to about 3.5%.
>Ppi-cpi scissors difference: in November, the ppi-cpi scissors difference decreased to 10.6 percentage points (the previous value was 12 percentage points), peaking and falling as scheduled. It is expected to continue to converge with the rise of CPI and the decline of PPI.
4. Follow up prompts four major concerns: pig price, epidemic disturbance, PPI to CPI transmission, upstream and downstream transmission of profits
>Pig price: the recent rise in pork price is mainly caused by seasonal rebound in demand + strategic collection and storage. It is expected that pork price may remain strong before the Spring Festival, but the upward trend may be until the second half of next year. Before the new round of pork price upward cycle is really opened, as the pig stock is still high and the supply is still too large, it is expected that the upward space of pork price is limited, and the support for CPI may be weakened.
>Omic mutant: if it is finally proved that the transmission capacity of Omicron can be greatly enhanced, even if China continues the dynamic clearing policy, there is a greater possibility of repeated local epidemics, which may drag down the service price. For example, during the epidemic in Guangzhou, Nanjing in August and Fujian in September this year, the CPI service items were significantly low.
>Transmission of PPI to CPI: in November, PPI means of living increased by the highest single month since the epidemic, indicating that the transmission of PPI means of production to means of living may be accelerating. According to the analysis of our annual report, generally speaking, the transmission effect of PPI means of living to CPI is good, the trend of the two is basically the same, and PPI means of living is roughly 1-3 months ahead of CPI. Therefore, the transmission from PPI to CPI may be strengthened, which will also strengthen the upward trend of CPI.
>Upstream and downstream transmission of profits: Based on the annual judgment and the experience of narrowing the scissors gap between PPI and CPI in the past five rounds, after this round of ppi-cpi narrowing, the upstream profit margin will be transmitted to the middle and downstream, and the upstream squeeze on the middle and downstream will be gradually weakened. However, in view of factors such as double carbon, global supply chain friction and epidemic impact on consumption, the short-term upstream profits are still resilient, The actual improvement of the middle and lower reaches remains to be observed. risk
Tip: the change of epidemic situation and the strength of policies exceeded expectations.
