In addition to the impact of the sharp rise in energy prices, the CPI of food and service items was weak month on month in February, and the year-on-year growth rate of core CPI decreased slightly; Under the environment of rising overseas energy prices and China’s stable supply and price, the prices of industrial products have differentiated, and PPI has stopped falling and turned up month on month, but the downward trend of year-on-year growth remains unchanged. Inflation trend – it is expected that the year-on-year growth rate of CPI will rebound and the year-on-year growth rate of PPI will continue to decline, which does not constitute a significant restriction on monetary policy.
CPI rose flat year-on-year, month on month, and core inflation fell. In February, CPI was flat compared with the previous month (0.9%, 0.0pct), slightly lower than market expectations, and continued to rise month on month (0.6%, + 0.2pcts). On a year-on-year basis, the CPI of food items continued to decline (- 3.9%, – 0.1pcts), affecting a year-on-year decline of about 0.76 percentage points; Non food CPI turned from decline to rise year-on-year (2.1%, + 0.1pcts), and the year-on-year increase of core CPI fell (1.1%, – 0.1pcts). On a month on month basis, the CPI increase of food items was the same as that of the previous month (1.4%, 0.0pct), which affected the CPI increase by about 0.26 percentage points; Affected by the rise of international energy prices and the Spring Festival, the month on month increase of non food itemized prices expanded (0.4%, + 0.2pcts), affecting the month on month increase of CPI by about 0.34 percentage points.
Pig prices fell, fruits and vegetables rose, and CPI of food items rose steadily month on month. In February, food prices continued to fall year-on-year (- 3.9%, – 0.1pcts), but month on month prices continued to rise (1.4%, 0.0pct). Specifically: first of all, with the fall in demand after the festival and the continuous recovery of pig marketing, pork prices continued to fall, and the average wholesale price of pork decreased by 9.3% month on month in February; Secondly, with the increasing demand for vegetables and fruits during the Spring Festival, the price of vegetables stopped falling and turned up, and the average price of fresh vegetables increased by 6.6%. At the end of February, the average wholesale price of 28 key monitored vegetables rebounded to 5.69 yuan / kg; Fruit prices continued to rise seasonally, and the average wholesale price of seven key tested fruits increased by 4.97% month on month; The price of beef and mutton remained stable, with little change compared with January; The price of chicken changed from rise to fall under the influence of low-priced pork. Overall, affected by the Spring Festival, the price of fresh vegetables and fruits rebounded in February, driving the CPI of food items to continue to rise month on month.
The impact of energy price rise is great, and the CPI of non food items continues to rise month on month and year on year. In February, the prices of non food items continued to rise month on month, with an increase of 0.2pcts compared with the previous month, and also continued to rise year-on-year (2.2%, + 0.1pcts). Among them, the price of consumer goods increased by 0.2% month on month, and the price of service industry was flat from the rise of the previous month. Specifically, the tense situation between Russia and Ukraine led to a significant rise in international crude oil prices in February, driving the prices of gasoline, diesel and LPG in China to rise by 6.2%, 6.7% and 1.3% respectively, which was transmitted to the continuous rise of fuel prices for transportation vehicles (6.1%, + 3.9pcts); After the Spring Festival holiday, migrant workers returned to the city one after another. In February, PMI employees recorded 49.2%, a slight increase over the previous month, and the rent of rental housing turned up from decline (0.1%, + 0.3pcts); During the Spring Festival, the price of film and performance tickets increased by 9.3%, and the price of home stay and other accommodation increased by 2.2%. However, compared with the Spring Festival months over the years, the month on month growth of CPI in non food items, service items and core CPI in February this year was low.
Overseas energy prices rose sharply, while China’s price protection and stable supply continued, PPI stopped falling and turned up month on month, and the downward trend of year-on-year increase remained unchanged. In February, the year-on-year increase of PPI fell (8.8%, – 0.3pcts), and the decline stopped and turned to increase (0.5%, + 0.7pcts), among which the upstream mining industry increased significantly (1.3%, + 2.6pcts). Specifically: first of all, the tightening of the international political situation and the sanctions against Russia led to an obvious rise in international oil prices, natural gas and other energy prices in February, driving the prices of Petrochina Company Limited(601857) related industries to continue to rise. Among them, the price of oil exploitation industry increased by 2.6% month on month, an increase of 10.9pctss compared with last month, and the manufacturing price of refined petroleum products increased by 6.5% month on month, The spot price of Brent crude oil rose 12.6% month on month, and the manufacturing price of organic chemical raw materials rose 2.9% month on month; Secondly, the monthly average of coal prices fell in February, and the prices of coal mining, washing and processing decreased by 2.4% month on month. Thirdly, under the expectation of intensified infrastructure investment, the steel price stopped falling and turned up, the steel price index rose by 3%, and the prices of ferrous metal smelting and rolling processing industry stopped falling and turned up month on month (0.7%, + 2.6pcts); In addition, the price of cathode copper futures rose by 1.2% month on month, and the price of international non-ferrous metals rose, driving the price of China’s non-ferrous metal smelting and rolling processing industry to rise by 2.0% month on month. Although upstream energy prices rose significantly under the influence of geopolitics, and PPI also stopped falling and turned up month on month, under the high base of last year, the downward trend of PPI year-on-year growth is not expected to change, but the center may rise compared with previous expectations.
Inflation scissors continue to narrow. In February, the year-on-year increase of CPI was the same as that of the previous month, the year-on-year increase of PPI was lower than that of the previous month, and the ppi-cpi scissors gap continued to narrow. On the one hand, the import price rising pressure represented by crude oil continues, the international political situation in Russia and Ukraine is tense, and the rise in international energy prices has led to the rise in the prices of Petrochina Company Limited(601857) , gas related industries, which has been transmitted to the CPI, and the month on month prices of transportation and residential items have increased; On the other hand, under China’s policy of ensuring supply and stabilizing prices, coal prices continued to fall, while the decline in infrastructure and real estate activities during the Spring Festival led to a decline in demand for glass cement and other non-metallic minerals, and the itemized prices of non-metallic minerals continued to fall. Finally, under the base effect, it is expected that the downward trend of the year-on-year growth rate of PPI in the later stage will continue, while the year-on-year growth rate of CPI is expected to be low. After running at a low level, it may face the situation of rising pig price and high oil price, face certain upward risks, and the inflation scissors difference is expected to continue to narrow.
Bond market strategy: February is the Spring Festival month, during which the prices of most goods and services rise seasonally. However, compared with the Spring Festival month in previous years, in addition to the impact of the sharp rise in energy prices, the month on month growth rate of CPI of food and services is weaker than that in previous years, and the year-on-year growth rate of core CPI decreased slightly; In terms of PPI, under the rising overseas energy prices and China’s policy of maintaining supply and stabilizing prices, the prices of industrial products have been differentiated, and the PPI has increased month on month, but the downward trend of year-on-year growth remains unchanged. We believe that the inflation performance has been affected by overseas geopolitics since February. At the current stage, it is mainly transmitted through energy prices. Looking back, the risk of starting a new round of pig cycle is superimposed with the risk of high oil prices. The inflation center may need to be repaired, but the inflation trend – year-on-year shock recovery of CPI and year-on-year decline of PPI are expected to continue.
For the bond market, inflation risk does not constitute a significant constraint on monetary policy, and the top constraint of 2.85% interest rate is still in place, so we can grasp the trading opportunities after oversold.
