CPI will gradually rise in the future, inflation will rise month on month, and food and non food prices will rise at the same time. (1) In terms of food, vegetable prices rose. The rainy and snowy weather in February led to the rise of vegetables; The retail price of pork went down, and the price of live pigs fell during the Spring Festival; (2) In terms of non food prices, affected by the upward price of crude oil, the price of fuel for transportation increased; In terms of service prices, family service prices fell, tourism prices rose by 1.0%, and the overall service prices remained stable. In addition, the price of household appliances rose by 1.1%.
Vegetables and pork continued to fluctuate, and energy prices rose. (1) pork demand fell after years, and pork supply was still relatively sufficient. After the Spring Festival, consumption is becoming more and more stable, and the pig market still needs to continue to digest inventory. Pork prices are already near the cost line, and pork prices are expected to fluctuate slightly in March. (2) The price of vegetables is greatly affected by the weather. In the middle of February, there was rain and snow all over the country, the transportation and supply of vegetables was slightly sluggish, and the price rose rapidly. In the first nine days of March, the price of vegetables still did not decline, and the price of vegetables exceeded the historical price. It is expected to appear in late March. (3) the rise of crude oil price brought about the rise of non food prices. Due to the prominent geopolitical risks, the prices of bulk commodities, including crude oil, rose, putting pressure on CPI in the future.
The inflation expectation for the whole year is upward, and the tail warping in February 2022 will affect 0.3%. It is expected that the new price increase factors will rise, and the year-on-year growth rate of CPI is about 0.7%. It is estimated that the annual CPI growth rate in 2022 will be 2.0%, and the CPI will exceed 2% in the third to fourth quarters of 2022. (1) The slow recovery of China’s consumption and the slow growth of personnel wages, coupled with the strict control of covid-19 epidemic, have seriously affected the growth of consumption, and China’s inflation is still at a low level. (2) The price of industrial products has dropped, and it is still difficult to transmit the price of industrial products to consumer goods. It is difficult for consumers to accept the upward price. (3) The pig cycle may reverse in the second half of 2022, and the reason for the year-on-year base will drive the CPI upward in the second half of the year.
Moderate inflation in the future (1) the rising prices of raw materials in the upper and middle reaches and the slow rise of labor costs have promoted the steady rise of CPI. (2) The residents’ energy consumption will be controlled slowly and the cost of living will remain high.
(3) the main problem facing China’s future economy is the lack of effective demand. Expanding effective demand needs to solve the problem of distribution, that is, reducing the polarization between the rich and the poor in the whole society, which still takes time. The overall upward probability of CPI is very small, and it is expected that CPI will rise moderately in the next 2-3 years.
PPI fell, but remained at a high level. In February, PPI rose month on month, the ex factory price of goods in the black industrial chain rebounded, the price of crude oil rose, and the prices of related products in its industrial chain rose: (1) the rise of international crude oil prices led to the rise of Petrochina Company Limited(601857) and related industrial prices; (2) China’s coal prices rose again. The futures price of thermal coal rose by 10.5% in February, but the ex factory price of coal is still controlled to a certain extent; (3) The consumer industry rebounded slightly, and the food manufacturing industry rose by 0.2%.
In March, the base level continued to decline, the month on month ratio may continue to rise, and China’s PPI may rebound: (1) energy prices rose sharply and remained high for some time. In March, energy prices continued to rise, driving the prices of related products higher; (2) The production cost goes up, the production is balanced at a low level, and the price is transferred to the terminal; (3) Logistics congestion has been alleviated, and BDI, which mainly reflects the transportation of bulk commodities, has rebounded, indicating that the decline rate of PPI will slow down in the future.
The PPI is expected to rebound month on month in March. The tail raising level of PPI in March is 7.2%, and the PPI level is expected to be about 9.0%. In 2022, PPI is expected to be around 6% in the whole year. Affected by the base, PPI is a low point in the fourth quarter.
