Vegetable crude oil led inflation downward, CPI fell month on month, and food and non food prices weakened: (1) in terms of food, the national weather was fine in December, the supply of vegetables was stable, and the high price of vegetables fell; (2) In terms of non food prices, affected by the decline of crude oil prices, the prices of hydropower fuel and vehicle fuel fell. From the perspective of non food prices, impact factors still account for the main part. The decline in hydropower and gas prices and vehicle fuel prices stems from the decline in energy prices such as crude oil and coal. The transmission of costs continues, and the upward price of daily necessities and services represents that the upstream price pressure is transmitted to the consumer terminal slightly.
Vegetables have entered the peak consumption season, and pork prices continued to rise year ago. Pork prices rebounded sharply in November, fell sharply in December, the cured meat production market ended, and the number of live pigs is still large. The demand for new year pigs in January will drive the pork price upward. Vegetable prices are greatly affected by the weather. The overall weather in December was fine, which got rid of the cold air in November. During the listing period, the vegetable production was stable and the vegetable price fell. The weather remained stable in January, and vegetable prices rose slowly with the arrival of the Spring Festival in January.
Inflation rose slightly throughout the year. It is expected that CPI will increase by 1.9% in 2022 and exceed 2% in the third to fourth quarters of 2022. (1) Due to the slow recovery of China’s consumption and the slow growth of personnel wages, the basis for the sharp rise of China’s inflation does not exist. (2) The price of industrial products has dropped, and it is still difficult for the price of industrial products to transmit to consumer goods. It is difficult for consumers to accept the upward price. In December, the prices of household appliances and services rose slightly, which is the result of upstream price transmission, but the probability of continuous rise is small. (3) The pig cycle may rise in the second half of 2022, and the reason for the year-on-year base will drive the CPI upward in the second half of 2022.
Moderate inflation in the future (1) the rising prices of raw materials in the upper and middle reaches and the slow rise of labor costs have promoted the steady rise of CPI. (2) The dual control of energy consumption and the big goal of carbon neutralization remain unchanged, and the living cost of residents will be slowly pushed up. (3) The main problem facing China’s future economy is the lack of effective demand. Expanding effective demand needs to solve the problem of distribution, that is, reducing the polarization between the rich and the poor in the whole society, which still takes time. The overall upward probability of CPI is very small, and it is expected that CPI will rise moderately in the next 2-3 years.
PPI will gradually decline in the future, the year-on-year increase of industrial producer prices (PPI) will narrow, and the means of production will fall month on month. In December, PPI fell month on month, the ex factory price of commodities in the black industrial chain fell, the price of crude oil fell, and the prices of related products in the industrial chain fell: (1) the decline of international crude oil prices led to the decline of Petrochina Company Limited(601857) and related industrial prices; (2) China’s coal price has been controlled, the futures price still fell in December, and the market trading price fell.
The base level continued to decline in January. Although it may stabilize month on month, China’s PPI continued to fall: (1) the energy price rebound that led to the rapid decline of PPI. In January, the energy price shock led by thermal coal bottomed out, and the crude oil price rebounded, but the inflationary pressure continued to reduce, and the enterprise production recovered slowly; (2) The logistics congestion has been alleviated, and the BDI mainly reflecting the transportation of bulk commodities has decreased, indicating the decline of PPI in the future.
It is expected that the PPI in January will be stable month on month. The tail warping level of PPI in January is 9.3%, and the PPI level is expected to be about 9.5%. In 2022, PPI will be high before and low after, and it is expected to be about 4% in the whole year. Affected by the base, PPI may have a negative growth in the fourth quarter.
