In March, the year-on-year growth rate of CPI jumped to 1.5%, and the month on month growth rate returned to zero, setting a new high in the same period since 2013. Why has CPI growth picked up significantly in the near future? Will it continue to rise in the future and bring greater upward risks? This report analyzes this.
Vegetable prices reached a new high and food prices accelerated. In March, the growth rate of food items in CPI was much higher than that in the same period of previous years. This phenomenon did not disappear in April, and the higher frequency food price index also reflected a similar phenomenon. Fresh vegetable prices rose first. From the CPI food sub items, the month on month growth rates of fresh vegetables, eggs and grain in March were significantly higher than the average level over the same period of the previous year, with the increase of vegetable prices taking the lead. From the two dimensions of the weight and volatility of each sub item, its impact on the change of CPI food price shows that the price of pork and fresh vegetables are the two most important factors determining the change of food price growth in CPI, and the change of food price is the leading force of CPI growth. The subsequent judgment of inflation needs to pay close attention to the changes of vegetable prices and pig prices. Although the vegetable price has dropped seasonally since April, it is still a new high in the same period over the years, and the pork price has also stopped falling since April, which significantly narrowed the decline in the month on month growth rate of its price in April. However, from the perspective of price level, it is still at the low level in the same period since 2014.
The epidemic hinders transportation and oil prices fuel the fire. From the change of fresh vegetable price, it has obvious seasonal characteristics. Low temperature weather interferes with production. On the one hand, there is the interference of weather factors to some extent. Most of the major vegetable producing provinces in China come from the north. After the Spring Festival this year, many places in the North experienced low-temperature weather different from the same period in previous years, which interfered with the policy production of vegetables. The epidemic blockade has led to limited transportation. On the other hand, the more important reason is concentrated in the transportation end. Since the middle and late March, the epidemic in China has spread rapidly. Under the requirements of the epidemic prevention policy of "dynamic clearing", traffic control has been strengthened in many places across the country, which has led to the continuous decline of the national vehicle freight flow index. In late March, the national freight flow has been lower than the daily average level in 2019. There is a significant negative correlation between vegetable price increase and freight flow. Our study found that since the middle and late March, there has been a significant negative correlation between the market price change of Chinese cabbage and the local freight flow. The more severely the transportation is limited, the greater the increase of vegetable price. Rising oil prices push up costs. In addition, the conflict between Russia and Ukraine broke out in late February, which promoted the rapid rise of Brent crude oil price. The rise of oil price led to the rise of gasoline and chemical fertilizer prices, and the rising cost also contributed to Shenzhen Agricultural Products Group Co.Ltd(000061) prices. However, it is worth noting that the rise in oil prices alone does not constitute a sufficient condition for the rise in vegetable prices. We believe that the main reason is the poor transportation caused by the epidemic. In March and October last year, oil prices also rose periodically, but only in October was reflected in the price of fresh vegetables, mainly because there was also a supply shock at that time.
The upward pressure has not disappeared, which may break 2% in April. The final relief of the pressure of rising prices needs to wait for the end of the epidemic and the traffic flow to return to normal. The epidemic situation in Shanghai, the "hardest hit area" of the current epidemic in China, is not clear, and there is no clear timetable for the lifting of prevention and control measures. Therefore, in the short term, the pressure of rising food prices such as vegetable prices has not been eliminated. The trend of CPI, especially the judgment of food prices, is also inseparable from pig prices. The recent decline of pig prices is related to the purchase and storage factors. In terms of supply, the year-on-year growth rate of fertile sows has continued to decline since April last year, corresponding to the upward cycle of pig prices in the second half of this year at the latest, but the recovery trend may be mild. From the high-frequency data changes of various foods, the month on month growth rate of food prices in April was generally higher than the average level of the same period in previous years, and the impact of the epidemic on prices in April deepened. We expect that the year-on-year growth rate of CPI in April may exceed 2%, so we need to be vigilant against the rise of prices.
Risk tip: policy changes, economic recovery is less than expected.
