Event: CPI in February was 0.9% year-on-year, expected to be 0.8%, and the previous value was 0.9%; PPI was 8.8% year-on-year, 8.7% expected, and the previous value was 9.1%.
Core view: CPI fell flat in February, PPI decreased slightly year-on-year, but increased significantly month on month. The rise of oil price is the main reason. In the future, the chain reaction of the sharp rise in oil prices will gradually appear, including dragging down the global economy, increasing the risk of global stagflation, and the upstream squeezing the profits of the middle and lower reaches again. In terms of inflation trend, "CPI up and PPI down" is still the benchmark situation in 2022, but driven by high oil prices, China's PPI is likely to turn up again in the next two or three months.
\u3000\u30001. CPI ended the downward trend since November last year and became flat, with food items still the main drag. On a month on month basis, due to the influence of Spring Festival, oil price and other factors, CPI rose more month on month, but still weaker than seasonality; Among them, the sub items of food continued to rise, the increase was the same as that of the previous month, and fresh vegetables and fruits were the main support; The increase in non food items expanded, mainly due to the rise in energy prices. Specifically, the CPI in February was flat year-on-year, with the previous value of 0.9%, of which the tail warping and new price rise factors affected - 0.1 and 1.0 percentage points respectively. The year-on-year decline of food items expanded by 0.1 percentage points to 3.9%, affecting the decline of CPI by about 0.76 percentage points; The year-on-year increase of non food items increased by 0.1 percentage points to 2.1%, driving the CPI upward by about 1.68 percentage points; Excluding energy and food, the core CPI fell 0.1 percentage point year-on-year to 1.1%.
Food items continued to rise month on month, the increase was the same as last month, but significantly weaker than seasonality. The month on month growth of CPI food items in February was flat, 1.4% of the previous month, lower than the (seasonal) average of 3.4% in the same period of 20162019. Most of the key Shenzhen Agricultural Products Group Co.Ltd(000061) prices are weaker than the seasonality. Among them, pork prices fell by 4.6% month on month and grain prices rose by 0.1% month on month, both the lowest in the same period since 2009; Fresh fruit prices rose 3.0% month on month, the second lowest since the same period in 2009; The prices of beef and mutton rose by 0.8% and 0.3% month on month respectively, the second lowest since the data were available; Fresh vegetable prices rose 6.0% month on month, also weaker than seasonality.
The growth of non food items increased month on month, slightly stronger than that of seasonality; Rising energy prices are the main driving force, and service prices are divided. The month on month growth of non food items in February expanded by 0.2 percentage points to 0.4%, higher than the (seasonal) average of 0.3% in the same period of 20162019. In terms of breakdown, the price of industrial consumer goods increased by 0.8% from flat. Among them, due to the sharp rise in international oil prices, gasoline, diesel and liquefied petroleum gas increased by 1.3% - 6.7%; The service price has changed from rising to flat. Due to the Spring Festival, the prices related to entertainment and travel have increased; The prices of housekeeping, mother and baby and other related services fell.
Core CPI fell slightly by 0.1 percentage points to 1.1%; The month on month increase rose 0.1 percentage points to 0.2%, slightly lower than the average of 0.3% in the same period of 20162019, indicating that China's consumer demand is still weak; Follow up tips: pay attention to the price transmission of industrial products, relevant measures to promote consumption and local epidemic disturbance.
\u3000\u30002. PPI continued to fall year-on-year, but the decline was significantly narrowed to 0.3 percentage points from 1.2 percentage points last month. On a month on month basis, due to the sharp rise in the prices of crude oil, nonferrous metals and other bulk commodities, PPI changed from decline to rise on a month on month basis; Among them, most PPI industries rose month on month, especially mining and raw materials; Most of the subdivided industries rose month on month. Specifically, the PPI fell 0.3 percentage points to 8.8% year-on-year in February, of which the tail warping and new price rise factors affected 8.4 and 0.4 percentage points respectively; PPI rose 0.5% month on month (MOM) from a decline of 0.2%.
From the perspective of production and means of living: the transmission of upstream prices to downstream has been strengthened, but it is still weak. In February, the price of means of production increased by 0.7% from 0.2% month on month; The month on month growth of means of living changed from flat to 0.1%, indicating that the transmission of upstream price rise to downstream has been strengthened, but the overall situation is still weak.
In terms of seven major industries: most industries increased month on month, and the increase in the upstream was significantly greater than that in the middle and downstream. Specifically, the prices of upstream mining and raw materials increased by 2.6 and 1.3 percentage points to 1.3% and 1.9% respectively compared with the previous value; The prices of processing industry in the middle reaches, downstream food and general daily necessities increased by 0.6, 0.3 and 0.1 percentage points to 0.1%, 0.2% and 0.2% respectively compared with the previous value; Downstream clothing and durable consumer goods prices fell 0.3 percentage points month on month to - 0.1%.
In terms of 40 industrial industries, most of the growth of subdivided industries rebounded month on month, the growth of crude oil chain, black, nonferrous metals and other industries increased significantly, and the price decline of consumer goods manufacturing related industries expanded month on month. Specifically: 1) the coal price changed from decline to rise month on month. In February, Qinhuangdao q5500 power coal price increased by 4.6% month on month (MOM) from a decrease of 7.2%, driving the mom growth rate of PPI coal mining and beneficiation industry to rise by 1.1 percentage points to - 2.4%. 2) International oil prices rose sharply. Due to the intensification of the conflict between Russia and Ukraine, the oil distribution increased sharply by 10.0% month on month in February, driving the month on month growth rate of PPI oil and gas exploitation, fuel processing, chemical industry and chemical fiber industry to rise by 7.8, 4.6, 2.3 and 1.2 percentage points to 10.4%, 5.0%, 1.0% and 1.1% respectively. 3) Steel prices turned from decline to rise. In February, the spot price of rebar changed from a decrease of 1.0% to an increase of 3.0% month on month, driving the chain growth rate of PPI black smelting and black mining to expand by 2.6 and 4.0 percentage points to 0.7% and 5.0%. 4) Most of the price increases of downstream consumer goods narrowed. Among the 9 downstream consumer goods manufacturing industries such as agricultural and sideline food manufacturing, the month on month increase of 6 PPI narrowed by 0.1-0.4 percentage points, which can also reflect that China's demand is still weak.
\u3000\u30003. The continued surge in oil prices is likely to lead to global stagflation, focusing on three major impacts:
As of March 8, oil distribution closed at US $128 / barrel and once soared to US $139.1 / barrel, up 64.5% this year; Superimposed on the expectation of global economic slowdown, capital markets are worried about whether the world will fall into stagflation in 1970s. We believe that the sharp rise in oil prices may indeed exacerbate the risk of global stagflation (China is "sluggish" and Europe and the United States is "rising"). We focus on three aspects:
On the global economy: according to the news report of China Central Television, US President Biden "has officially signed the executive order prohibiting the United States from importing energy from Russia". Russia previously threatened to cut off the supply of Beixi No. 1 natural gas. If relevant measures are implemented, the global energy shortage may continue to intensify, which will drag down the global economy. For example, taking natural gas as an example, in 2020, Russia's natural gas exports will be about 19.9 billion cubic meters, accounting for about 16.2% of global natural gas exports, of which about 80% will be exported to Europe, accounting for 41% and 27% of European natural gas imports and consumption respectively. If Russia cuts off the natural gas supply of Beixi No. 1, it will further aggravate the shortage of energy supply in Europe, This will drag down the European and global economies. For example, in 2021q4, due to the rise of energy prices, the production of electrolytic aluminum industry in Europe has been reduced by more than Shanghai Pudong Development Bank Co.Ltd(600000) tons, accounting for 15% of the completed production capacity in Western Europe.
For inflation: according to our previous calculation, if the oil price rises by 10%, PPI will rise by 0.4 percentage points year-on-year (see the 4-point impact of the escalation of the conflict between Russia and Ukraine for the calculation process). Assuming that the oil price remains at $120 / barrel from March to may, the year-on-year pull of oil price on PPI will rise from 1.9 percentage points in February to 3.1, 3.2 and 2.9 percentage points respectively, that is, it will bring an increase of 1.2, 1.2 and 0.9 percentage points on the basis of February (there are differences in specific data due to rounding).
Considering the tail warping factor, the influence of base effect on PPI from March to May is 1.7, 1.0 and 1.7 percentage points respectively; In other words, in this case, PPI may rise periodically in April. If the oil price remains at $140 / barrel from March to may, the year-on-year pull of oil price on PPI will rise to 4.3, 4.3 and 4.0 percentage points respectively, that is, it will further increase by 2.4, 2.4 and 2.0 percentage points on the basis of February. In this case, PPI may rise periodically in March. In addition, the prices of black (coal, iron ore, rebar) and nonferrous metals in China have also increased significantly recently. If the three resonate upward in the future, it will further increase the phased pressure on PPI (detailed calculation is attached).
For corporate profits: referring to the experience of narrowing the ppi-cpi scissors gap in the past, continue to suggest that the transmission of upstream profits to the middle and lower reaches should be one of the main lines of corporate profits this year; However, in view of the recent rise in bulk prices, the impact of the epidemic on consumption and other factors, the range and time may be slower than expected. It is expected that the proportion of short-term upstream profits will remain high (e.g. higher than 50%), and it is not even ruled out the possibility of another periodic upward trend; The actual improvement of profits in the middle and lower reaches remains to be seen.
\u3000\u30004. Inflation outlook: "CPI up and PPI down" is still the benchmark situation in 2022, but high oil prices do not rule out PPI turning upward in the next 2-3 months
PPI: according to high-frequency data, in the first week of March, Nanhua industrial products index rose 9.3% month on month, CRB spot index rose 1.8% month on month, crude oil and rebar prices rose 23.6% and 3.4% month on month respectively, and coal prices fell 4.9% month on month. Looking back, the biggest uncertainty lies in the oil price. It is expected that the PPI will still rise slightly month on month in March. Throughout the year: energy prices are still the biggest uncertainty. 1) Under neutral circumstances, if the conflict between Russia and Ukraine does not escalate significantly, the central oil price of the whole year will rise to about US $95 / barrel, adding that China's bulk prices are generally controllable. It is expected that the PPI may rise to about 4.3% in 2022. 2) Under the pessimistic situation, if the conflict between Russia and Ukraine and the continuous escalation of European and American sanctions, the international oil price will rise further and remain high for a long time, assuming that the oil price center in the whole year rises to about $110 / barrel, and China's bulk price will remain high under the background of steady growth, the PPI may rise to about 5.0% in 2022. 3) In an optimistic situation, if the conflict between Russia and Ukraine can be properly resolved in a short time, the international oil price will gradually fall. Assuming that the central level of the whole year falls to about $85 / barrel, and China's commodity prices can also be better controlled, the PPI may remain at about 3.8% year-on-year in 2022.
CPI: according to high-frequency data, in the first week of March, the increase of vegetable prices narrowed, the price of fruits turned from rise to fall, and the prices of eggs and pork fell by 3.8% and 8.4% month on month respectively. It is expected that the CPI food sub item may fall significantly in March; Non food items are expected to continue to be driven by oil prices. Therefore, it is expected that CPI may rise slightly month on month in March, and it is also expected to rise year-on-year. Throughout the year: the market has consistent expectations for the trend of low CPI before and high CPI after, but there are differences on the specific range. Among them, energy prices, pig cycle and consumption recovery are the main disturbances. Assuming that the pig cycle and consumption recovery continue our previous judgment, under the optimistic, neutral and pessimistic oil prices, the oil price will bring an additional increase of 0.1, 0.2 and 0.3 percentage points to the annual CPI year-on-year, corresponding to about 2.1%, 2.2% and 2.4% of the annual CPI year-on-year, respectively.
Risk tip: the change of epidemic situation and the strength of policies exceeded expectations.
