In December 2021, CPI increased by 1.5% year-on-year (market expectation was 1.7%), and the previous value was 2.3%. PPI increased by 10.3% year-on-year (market expectation was 10.8%), and the previous value was 12.9%. In 2021, CPI increased by 0.9% and PPI increased by 8.1% year-on-year.
I. CPI: food prices boost the decline
In December, the year-on-year growth rate of CPI dropped slightly, down 0.8pct to 1.5% compared with the previous value. The impact of food items on CPI turned negative again. Food prices fell by 1.2% year-on-year in December, driving CPI from 0.3pct to -0.22pct. The expansion of the year-on-year decline in pork prices and the sharp drop in the increase in vegetable prices are the main reasons. In December, the slaughter of live pigs was accelerated, and the price of pork decreased by 36.7% year-on-year, 4.0 PCT more than that of the previous month, affecting the CPI to decline by about 0.81 PCT; The number of fresh vegetables on the market increased, and the price rose by 10.6%, down 20.0pct from the previous month.
The support of non food items for CPI is also relatively weak, and the decline of oil price is the main influencing factor. In December, non food prices rose by 2.1%, down 0.4pct from the previous month, affecting the CPI to rise by about 1.69pct, down 0.35pct from the previous month. Affected by the downward trend of international crude oil prices, the year-on-year growth rate of gasoline and diesel prices in China fell significantly, resulting in a significant decrease in the year-on-year growth rate of vehicle fuel, which reduced the pull of relevant consumer prices on CPI by 0.29pct to 0.56. In other aspects, the overall price of industrial consumer goods rose by 2.9%, down 1.0pct. Service prices rose by 1.5% year-on-year, the same as last month.
Looking forward, the year-on-year growth rate of CPI will maintain a moderate growth in the short term. On the one hand, with the advent of the peak consumption season of the Spring Festival, the prices of pork, fresh vegetables and other food are expected to be supported, and the impact of food on CPI is expected to rebound. On the other hand, as the epidemic panic subsides, the international oil price rebounds slightly and PPI is transmitted downward, the growth rate of non food prices will remain stable.
II. PPI: the downward trend continues
Affected by the general decline in the prices of means of production, the year-on-year growth rate of PPI tends to decline. In December, the year-on-year growth rate of PPI decreased by 2.6pct to 10.3% compared with the previous value, of which the price of means of production increased by 13.4% year-on-year, narrowed by 3.6pct, and the pull on PPI decreased by 2.6pct to 10.1pct. Leading indicators show that the price probability of industrial products has entered the downward period. In December, the ex factory price index in the manufacturing PMI fell again by 3.4pct to 45.5%, which was in the contraction range for two consecutive months. The purchase price index of main raw materials fell to 48.1%, which was lower than the boom and bust line for the first time since May 2020.
Accordingly, the month on month growth rate of PPI decreased by 1.2pct to - 1.2%, the first negative growth since June 2020.
The fall in commodity prices is the main reason for the decline in the prices of means of production. Under the influence of multiple factors such as the rebound of the global epidemic, the steady promotion of the policy of ensuring supply and stabilizing prices, and the weak demand for downstream real estate and infrastructure, the year-on-year growth rate of product prices in industries such as crude oil, coal, ferrous metals and non-ferrous metals decreased significantly, and the pull on PPI decreased accordingly. It is worth noting that the decline in the year-on-year growth rate of industrial prices is characterized by the sequential transmission from the upstream to the downstream. The price decline of the upstream mining industry is the most obvious, followed by the raw material processing industry and the processing industry.
The year-on-year growth rate of means of living remained stable, and the prices of various industrial products increased slightly year-on-year.
Although the price growth of means of production is gradually falling, the cost pressure of enterprises is still large, resulting in a slight year-on-year increase in the price of means of living. In December, the price of means of living increased by 1.0% year-on-year, which was the same as that of the previous month, driving the year-on-year growth rate of PPI by 0.25 PCT, which was basically the same as that of the previous month. In terms of structure, the year-on-year growth rate of food and clothing prices decreased slightly by 0.2pct, 1.4% and 1.0% respectively. The year-on-year growth rate of general daily necessities was the same as that of the previous month, with 1.4%. The year-on-year growth rate of durable consumer goods increased by 0.3pct to 0.4%.
Looking forward, although there is still the risk of epidemic disturbance, with the global commodity price shock falling and the policy of ensuring supply and stabilizing price further promoted, the year-on-year growth rate of PPI will continue to decline. In addition, due to the rapid decline of industrial product prices, the ppi-cpi scissors gap is expected to continue to converge, and the cost pressure faced by middle and downstream enterprises is expected to be gradually relieved.
