On March 10, the U.S. Department of labor released the CPI data for February: CPI increased by 7.9% year-on-year (expected 7.8%, previous value 7.5%) and 0.8% quarter on quarter (expected 0.7%, previous value 0.6%).
In terms of year-on-year growth, the CPI of the United States increased by 7.9% in February, continuing to hit a new high since 1982, an increase of 0.4 percentage points over the previous month. Mainly affected by the upward growth of food, rent and transportation service prices, the driving effect of the three on the CPI year-on-year increased by 0.1 percentage points; The growth rate of energy prices fell to 25.6% from 27.0% last month, down 1.4 percentage points.
From the perspective of month on month growth, the CPI of the United States increased by 0.8% in February, which was the highest in nearly four months and the highest in the same period since 1982, indicating that the new price increase momentum is strong, and the prices of energy, rent and transportation services are the main driving items. Among them, energy prices rose the most, from 0.9% last month to 3.5%; The growth rate of rent rose from 0.4% to 0.6%, a new high since April 2005, which is related to the tight labor market and rising wages; Transport services rose to 1.4% for two consecutive months; The three drove CPI growth by 0.3, 0.2 and 0.1 percentage points respectively. In addition, the price of used cars fell, and the growth rate fell to - 0.2% from 1.5% last month, indicating that supply constraints may improve.
In February, the supplier delivery index in the global manufacturing PMI was 39.3 and the global supply chain pressure index was 3.3. Both indicators show that the global supply chain problems continue to improve. However, the outbreak of the conflict between Russia and Ukraine on February 24 brought new disturbances to the global supply chain. As Russia and Ukraine are important exporters of Shenzhen Agricultural Products Group Co.Ltd(000061) , energy and metals, commodity prices rose significantly after the conflict. From February 24 to March 9, the CRB spot composite index rose 3.4% (food, oil and metals rose 4.4%, 5.2% and 7.1% respectively). Affected by this, we expect inflation pressure to further increase in March.
Before the conflict between Russia and Ukraine, the market generally expected that the global economic recovery slowed down in 2022, and the inflation index may peak and fall in the first half of the year. However, the outbreak of the conflict between Russia and Ukraine exacerbated the potential concern of stagflation. In January, the IMF predicted that global economic growth would drop to 4.4% from 5.9% in 2021. On March 10, IMF President georgiyeva said in an interview that considering the economic consequences of the conflict between Russia and Ukraine, the global economic growth expectation may be lowered. Earlier, a survey of fund managers by Bank of America showed that the proportion of people who believe that stagflation will occur in the next 12 months rose to 30% from 22% last month.
We believe that there are many differences between this stage and the stagflation stage in the 1970s, including the significant increase in the degree of globalization, the significant weakening of energy intensity, the decline of labor bargaining power, etc., but there are also some similarities. For example, the Federal Reserve emphasized the theory of temporary inflation in the initial stage, and then was forced to give up with the increase of inflationary pressure, Inflation expectations were significantly strengthened (Michigan's inflation expectations remained at 4.9% in February), and severe labor shortage exacerbated the risk of wage price spiral.
The above factors have increased the complexity of the normalization process of the Fed's monetary policy. Earlier, Powell pointed out at the hearing that there is great uncertainty about the short-term impact of the Russian Ukrainian conflict on the US economy. However, in view of the obvious upward pressure on inflation caused by the conflict, it is a foregone conclusion that the Fed will raise interest rates in March. The pace of subsequent interest rate hikes depends on the evolution of the situation in Russia and Ukraine and the US economic performance and market reaction after the interest rate hike. We temporarily maintain the judgment of raising interest rates four times during the year
