Core conclusion
CPI in February was 0.9% year-on-year, expected to be 0.9%, and the previous value was 0.9%; PPI was 8.8% year-on-year, 8.7% expected, and the previous value was 9.1%. We interpret this as follows:
Compared with the lard price, the year-on-year increase of CPI remained stable. In February, CPI rose by 0.9% year-on-year, unchanged from the previous value; CPI rose 0.6% month on month, up 0.2 percentage points from January. Overall, the CPI remained stable year-on-year in February under the hedging of the two core drivers of CPI, namely, the decline of pig price and the rise of oil price.
In terms of food items, the CPI of pork fell by 42.5% in February, affecting the CPI to decline by about 0.95 percentage points, down 4.6% month on month, mainly due to the traditional consumption off-season of pork after the Spring Festival and the relatively abundant supply of pork. Affected by the Spring Festival, CPI fresh vegetables increased by 6.0% and CPI fresh fruits increased by 3.0% month on month. In terms of non food items, CPI transportation and communication increased by 5.5% year-on-year and 1.4% month on month, both of which were the largest driving items of CPI in February. The main reason is that since February, the conflict between Russia and Ukraine has led to a sharp rise in international crude oil prices, driving the rise in the prices of transportation raw materials such as gasoline, diesel and aviation fuel oil in China, which has become the core factor driving the rise of non food items of CPI.
The year-on-year growth rate of PPI continued to decline, and crude oil and nonferrous metals increased significantly month on month. In February, PPI rose by 8.8% year-on-year and the previous value was 9.1%, which has fallen for four consecutive months; It rose 0.5% month on month (MOM) and became positive again after falling for two consecutive months, mainly due to the intensified impact of the conflict between Russia and Ukraine and the sharp rise in the prices of international commodities such as crude oil and nonferrous metals priced globally, which became the core factor driving the mom rise of PPI. Among them, the price of means of production increased by 11.4% year-on-year, driving PPI up by 8.6% year-on-year and 0.7% month on month; The price of means of living rose by 0.9%, driving PPI up by 0.2% and 0.1% month on month.
The conflict between Russia and Ukraine has limited impact on the rhythm of pig cycle. As for whether the conflict between Russia and Ukraine will accelerate the pig cycle, we believe that the short-term impact is limited. According to the public formula data of Muyuan Foods Co.Ltd(002714) 20172019, corn, wheat, soybean meal and others accounted for 56.7%, 6.07%, 14.93% and 22.23% of the feed cost respectively. Among these three items, China has basically achieved self-sufficiency in corn and wheat, with import consumption ratios of 9.35% and 6.44% respectively, and only soybean import consumption ratio of 84.33%. China imports soybeans mainly from the United States and Brazil. The recent price rise is mainly affected by the reduction of soybean production in Brazil, which has little to do with the conflict between Russia and Ukraine.
Q4cpi has the risk of breaking 4. Under the influence of the recent conflict between Russia and Ukraine, the rapid rise in the prices of international crude oil and non-ferrous metals may form a certain support for the chain comparison of PPI, and the year-on-year decline rate of PPI may also slow down, but the sustainability remains to be seen. With regard to CPI, we are in the report “how do you see China’s inflation prospects?” It is pointed out that as the recent oil price continues to exceed expectations, we believe that the possibility of Q4 China’s CPI breaking 4 is not low. According to our calculation, whether conservative or optimistic, the risk of Q3 China’s CPI breaking 3% year-on-year is not low, while the possibility of Q4 China’s CPI breaking 4% year-on-year is also rising.
Risk tip: the impact of Russia Ukraine conflict on commodity prices exceeded expectations; China’s steady growth policy is stronger than expected
