What PPI needs to pay attention to recently is the upward jump of PPI for two consecutive months.
From the perspective of PPI items, the acceleration of industrial product prices should be transmitted from the upstream, and the acceleration of mining industry prices should be higher than that of raw materials, processing and means of living.
This should be related to the Russian Ukrainian war, not the cause of the cycle:
1) otherwise, the CRB in April will not fall to the new low position in the year so quickly;
2) the oil price seems to be peaking, which indicates that the market is making a war reversal transaction;
3) if the trade sanctions caused by the conflict between Russia and Ukraine and the post conflict are relatively mild and not more than expected, the PPI will still be a general downward trend, and the rebound of PPI month on month should also be superficial;
4) these variables have not shaken our original judgment that PPI downward leads to downward revaluation of corporate profits at least for the time being.
From the short-term deviation between CPI and core CPI, crude oil and food should promote CPI upward.
In CPI food, the upward force mainly comes from grain and pork. The vegetable price seems to have increased greatly, but the tail raising factor of vegetable price has contributed to almost all the increase;
1) the rise in grain prices is actually more from the situation in Russia and Ukraine, and the logic is the same;
2) pork prices have bottomed out year-on-year, and the upward rebound is actually in line with the endogenous logic of the pig cycle, which will not be repeated here;
3) of course, the short-term fuel price is an additional item of CPI, but once we compare the fuel price with the international crude oil price, we find that the fuel price in China is too high. For this reason, the acceleration of fuel price is not sustainable.
However, between the top (pork) and the bottom (fuel), CPI may finally choose the upward direction of pork (the mother of CPI) after a short-term tangle, and pork in the second half of the year may still drive CPI higher than expected.
In addition, if the follow-up of epidemic prevention spreads from point to area, the price of necessities such as food will inevitably rise in the blocked traffic and logistics environment. Although this factor cannot be predicted, it does not matter. After all, if epidemic prevention is further tightened throughout the country, it will not change the trend of CPI, but can only make CPI from exceeding expectations to exceeding expectations.
If the subsequent CPI is up and PPI is down, the impact on monetary policy may not be large. First, local inflation may not affect monetary policy to a great extent; Second, the current monetary policy room is very limited. The peripheral interest rate increase or China’s weak fundamentals leave only room for fine-tuning of monetary policy.
However, in this case, pork may be the variety with deterministic price rise, and the prices of other varieties (grain, vegetables, upstream industrial products and energy) will be affected by the uncertainty of geopolitical and epidemic prevention policies at least in the short term.
