“Inflation” exacerbates the risk of “stagnation”. The increase of PPI and CPI in March was slightly higher than that expected by supermarkets. The external reason was that the international commodity prices continued to rise due to the conflict between Russia and Ukraine, and the internal reason was that the epidemic affected the efficiency of logistics and transportation, and the imported inflationary pressure in China increased. However, the current inflation itself is not the biggest pressure in the economy, but imported inflation has raised enterprise costs, the epidemic has suppressed China’s demand, and the profits of middle and lower reaches enterprises continue to be compressed, raising the risk of “stagnation”.
PPI continued to rise month on month. In March, PPI rose by 8.3% year-on-year, down 0.5 percentage points from the previous month, up 1.1% month on month, and the increase increased by 0.6 percentage points last month. Under the continuous interpretation of the conflict between Russia and Ukraine, international commodity prices continued to rise in March, driving the month on month increase of PPI. The year-on-year decline was mainly due to the high base of last year and the tail raising factor. In March, PPI was mainly driven by means of production. Although the scissors gap between means of production and means of living narrowed, the middle and lower reaches enterprises still faced high cost pressure, especially when the demand side was depressed, the profits of middle and lower reaches enterprises were further impacted.
The petrochemical industry chain continued to lead the rise. The main reason for the month on month rise of PPI in March was the sharp rise in international crude oil and non-ferrous metal prices due to the intensification of the conflict between Russia and Ukraine, which drove the China Petroleum & Chemical Corporation(600028) industrial chain and non-ferrous industrial chain to continue to rise. In addition, under the policy of steady growth, the investment in infrastructure has increased, and the prices of Chinese bulk commodities such as black products have also increased. The prices of coal mining and washing industry have increased by 2.5%, and the prices of ferrous metal smelting and rolling processing industry have increased by 1.4%.
CPI growth expanded. In March, CPI increased by 1.5% year-on-year, an increase of 0.6 percentage points over the previous month, and the month on month increase of 0.6% turned to flat; Core CPI increased by 1.1% year-on-year, the increase was the same as that of the previous month, and the month on month ratio changed from increase to decrease by 0.1%. Grain and oil have become the main factor driving the rise of CPI. Pork prices continue to decline. Under the influence of the epidemic, demand is down, and core CPI is in the doldrums.
The prices of grain, oil and vegetables rose. In March, food prices fell by 1.5% year-on-year, 2.4 percentage points lower than that of the previous month, affecting the decline of CPI by about 0.28 percentage points. Among the food items, the price increases are mainly grain, edible oil and fresh vegetables, which are mainly affected by the price increases of international wheat, corn and soybeans and the epidemic situation in China, resulting in the increase exceeding the seasonality. Affected by the fall in consumer demand and sufficient supply after the festival, pork prices continued to decline by 9.3% month on month, with a decline greater than seasonal. The pig cycle has not yet bottomed out, and pork prices will continue to decline in the first half of the year.
International crude oil prices push up transportation prices. In March, non food prices rose by 2.2% year-on-year, 0.1 percentage point higher than that of the previous month, 0.3% higher than that of the previous month, and 0.1 percentage point lower than that of the previous month. The rise in non food prices was mainly driven by the rise in international crude oil prices, with gasoline, diesel and LPG prices rising by 7.2%, 7.8% and 6.9% respectively, resulting in a month on month increase of 1.6% and a year-on-year increase of 5.8%, which was significantly higher than the seasonality. Service prices fell by 0.2% from flat last month. Among them, the fall in demand after the festival was superimposed on the impact of the epidemic, and the prices of air tickets, film and performance tickets, vehicle rental fees and tourism decreased by 10.0%, 7.6%, 3.5% and 2.6% respectively.
