Event: CPI in December was 1.5% year-on-year, expected to be 1.7%, and the previous value was 2.3%; PPI was 10.3% year-on-year, expected to be 10.8%, and the previous value was 12.9%. In 2021, the annual CPI was 0.9% year-on-year and 1.0% expected; PPI was 8.1% year-on-year and 8.1% expected.
Core view: in a single month, CPI and PPI fell as scheduled in December; Throughout the year, CPI weakness stabilized and PPI frequency reached a new high in 2021; Looking back, "CPI up and PPI down" in 2022 is the benchmark situation, and there are four major concerns in the short term.
1. In December, CPI fell as scheduled year-on-year, mainly due to the spread of the epidemic situation, Shenzhen Agricultural Products Group Co.Ltd(000061) supply guarantee measures and the increase of the base. Itemized: the ring to ring ratio of food items changed from rise to fall, the price of fresh vegetables fell sharply, and the price increase of pork and fresh fruit narrowed; Non food items changed from flat to down, and the prices of energy products and industrial consumer goods changed from up to down. In December, the CPI fell by 0.8 percentage points to 1.5% compared with the previous value; Among them, the food item changed from a year-on-year increase of 1.6% to a decrease of 1.2%, dragging down the CPI by about 0.22 percentage points; Non food items were 2.1% year-on-year, the increase narrowed by 0.4 percentage points, affecting the increase of CPI by about 1.69 percentage points; Core CPI was flat year-on-year, with the previous value of 1.2%.
Food item chain ratio changed from up to down, slightly weaker than seasonality, and fresh vegetable prices were the main drag. In December, the CPI food item chain ratio changed from an increase of 2.4% to a decrease of 0.6%, lower than the (seasonal) average of 0.4% in the same period of 2016-2019; Most of the key Shenzhen Agricultural Products Group Co.Ltd(000061) prices fell, of which the price of fresh vegetables fell by 15.1 percentage points to - 8.3% month on month due to improved supply, dragging down CPI by 0.21 percentage points month on month; Due to the end of winter curing and the acceleration of pig slaughter, pork prices decreased by 11.8 percentage points to 0.4% month on month.
Non food items fell from flat to lower month on month, weaker than seasonality. The main drag was the decline in the prices of energy products and industrial consumer goods. In December, non food prices fell by 0.2 percentage points month on month to - 0.2%, lower than the seasonal average of 0.1% in the same period from 2016 to 2019. Among them, the prices of gasoline, diesel and other energy products fell by 5.4% and 5.8% month on month respectively, and the prices of industrial consumer goods fell from 0.3% to 0.5%, respectively reflecting the impact of the decline in international oil prices and the effect of the policy of maintaining supply and stabilizing prices; Service prices are generally flat, but travel related prices have dropped, mainly reflecting the impact of repeated epidemics, and the rise in the prices of daily necessities and services, mainly reflecting the impact of the Spring Festival.
The core CPI was flat and continued to pay attention to the price transmission of industrial products (it is expected that the price center of industrial products will still be high) and the disturbance of the epidemic to service prices. Core CPI was flat year-on-year, with the previous value of 1.2%, rising 0.2 percentage points to 0% month on month, slightly weaker than the seasonality.
2. In December, PPI fell rapidly year-on-year, and the month on month ratio changed from flat to down, mainly due to the obvious effect of ensuring supply and stabilizing price, weakening demand in winter and falling oil price. Among them, most of PPI industries fell, and the decline of upstream mining and raw materials further deepened; Most of the subdivided industries also fell month on month, with large declines in coal, oil and gas exploitation, fuel processing and black. In December, PPI decreased by 2.6 percentage points year-on-year to 10.3%, of which the means of production decreased by 3.6 percentage points year-on-year to 13.4%, and the means of living remained unchanged by 1% year-on-year; PPI decreased by 1.2% month on month.
In terms of seven industries, prices generally fell in December, the decline of upstream mining and raw materials further deepened, and the growth of downstream consumption narrowed. Specifically, upstream mining, raw materials and midstream processing decreased by 4.7%, 2.6% and 0.6 percentage points respectively to - 6.8%, - 1.7% and - 0.9% compared with the previous value; The downstream food, clothing and commodity processing industry fell by 0.7, 0.7 and 0.3 percentage points to 0.1%, - 0.3% and 0.1% respectively compared with the previous value; Durable consumer goods rose slightly by 0.1 percentage points to - 0.1% month on month.
In terms of 40 industrial industries, most of the subdivided industries fell month on month, the prices of coal, fuel processing, non-metallic minerals (glass, cement, etc.), chemical industry and chemical fiber expanded, and the prices of downstream consumption related industries also fell month on month, mainly due to the obvious effect of the policy of maintaining supply and stabilizing prices, the decline of oil prices and weak demand. Specifically: 1) coal prices continue to fall sharply. Due to the further effect of price restriction and supply guarantee policies, the tight supply and demand of coal has significantly improved. In December, the price of q5500 power coal in Qinhuangdao fell by 8.3% month on month, driving the month on month growth rate of PPI coal mining and dressing industry to drop by 3.4 percentage points to - 8.3%. 2) The decline in international oil prices widened. Due to the Omicron mutant and the repeated impact of the epidemic on demand expectations, the month on month decline of oil distribution in December expanded by 4.0 percentage points to 7.5%, driving the month on month decline of oil and gas exploitation, fuel processing, chemical industry and chemical fiber by 13.4, 8.0, 2.8 and 3.5 percentage points to - 6.9%, - 6.3%, - 2.1% and - 3.1% respectively. 3) Steel prices changed from decline to rise. Due to the pressure drop of crude steel output and the expected rise of real estate infrastructure, the month on month decline of rebar spot price in December narrowed by 16.2 percentage points to 0.3%, driving the month on month decline of PPI black smelting by about 0.4 percentage points to 4.4%; However, the decline of PPI black mining further expanded by 2.4 percentage points to 8.7%, which deviated from each other. 4) The increase in electricity prices further expanded. The month on month growth of electricity and heat expanded again by 1.1 percentage points to 3.0%, significantly stronger than the (seasonal) average of 0.3% in the same period of 2016-2019, mainly due to the expansion of the floating range of transaction electricity price and the further effect of the policy.
\u3000\u30003. Overall, in 2021, CPI was weak and stable, PPI frequency reached a new high, and the benchmark situation in 2022 was "above CPI and below PPI"
CPI: in 2021, CPI showed an "n-shaped" trend, rising month by month from January to may, falling slightly from June to September, and rising again from October to November, with a year-on-year increase of 0.9%, slightly lower than the market expectation. Among them, pork prices and repeated epidemics are the main drag, vegetable prices have periodic disturbances, and the transmission from upstream prices to downstream is weaker than expected. Looking forward to 2022, maintain the annual judgment: CPI may rise year-on-year in 2022, the annual high may be around September, the high may exceed 3%, and the annual Central Center is about 2.4%. In the short term, in the first two weeks of January, the month on month decline in the prices of eggs, fresh vegetables and aquatic products narrowed, the decline in pork prices expanded, and the increase in fruit prices expanded; However, considering the influence of the Spring Festival, the CPI of food and non food items may rise month on month in January. Superimposed on the decline of the base in the same period in 2021, it is expected that the CPI may rise again year-on-year in January this year.
PPI: throughout 2021, PPI kept rising, with year-on-year readings and steep slopes reaching record highs, especially from September to October, reaching record highs of 10.7% and 13.5% respectively, which was not predicted by the early market, reflecting supply constraints under the dual control of "double carbon" and energy consumption, as well as input factors such as rising oil prices and freight rates. Looking forward to 2022, it is expected that factors such as production and power restriction, oil price and freight rate will improve. Maintain the annual judgment: PPI will decline year-on-year in 2022, Q4 may turn negative under the drag of high base, and it is expected to fall to about 3.5% year-on-year in the whole year. In the short term, in the first two weeks of January, Nanhua industrial products index rose 5.0% month on month, CRB spot index rose 1.4%, crude oil, rebar and copper prices rose 8.5%, 2.7% and 0.5% month on month, and coal prices fell 18.5% month on month.
In the future, considering the further development of infrastructure, the continuous promotion of real estate correction and some support for the demand side, it is expected that the PPI may be flat or rise slightly month on month. However, due to the recovery of the base, the PPI may fall further year-on-year in January.
Ppi-cpi scissors difference: in 2021, the ppi-cpi scissors difference continued to widen, reaching a record high from May to October, reaching 12 percentage points in October, and then falling with the peak of PPI. Looking back, it is expected to continue to converge as CPI tends to rise and PPI tends to fall. 4. There are four concerns in the short term: pig price, epidemic disturbance, infrastructure to support upstream price and upstream and downstream transmission of profits
Pork price: the recent performance of pork price is slightly lower than expected, mainly due to the acceleration of pig marketing. Maintaining the previous judgment, the upward trend of pork price may be until the second half of next year. Before the new round of pork price upward cycle is really opened, as the pig stock is still high and the supply is still too large, it is expected that the upward space of pork price is limited or even decline again, and the support for CPI may be further weakened.
Epidemic disturbance: judging from the characteristics of the virus itself, Omicron can affect China's inflation in two ways: first, the low severe rate of Omicron has led to the recent decline in overseas market concerns about Omicron and the rebound in the prices of crude oil and other commodities, which may strengthen the pressure of imported inflation; Second, under China's dynamic clearing policy, the impact on CPI service items may be stronger than in the past due to the stronger communication of Omicron. Which impact path will dominate needs to be concerned about the evolution of the epidemic in China in the future.
Infrastructure development: in the previous report "high growth rate of infrastructure in 2022, what are the driving points", we proposed that the growth rate of infrastructure in 2022 may rise to about 8% or even higher, and the new and old infrastructure will work together, which may support the upstream mining and raw material demand. It is expected that the downward slope of PPI may be slower than expected, Specific attention should be paid to the development of infrastructure in the next 1-2 quarters.
Upstream and downstream transmission of profits: Based on the previous judgment and the experience of narrowing the scissors difference of ppi-cpi in the past five rounds, with the continuous narrowing of subsequent ppi-cpi, the upstream profit margin will be transmitted to the middle and downstream, and the squeeze from the upstream to the middle and downstream will be gradually weakened. However, in view of the global supply chain friction, the impact of the epidemic on consumption and other factors, the short-term upstream profits are still resilient, and the actual improvement of the middle and lower reaches needs to be observed.
Risk tip: the change of epidemic situation and the strength of policies exceeded expectations.
