Ping An First Economics Team: Zhong Zhengsheng/Zhang Lu/Chang Yixin
Core viewpoints
Matters: CPI in June 2022 was 2.5% year-on-year, and PPI was 6.1% year-on-year.
html The CPI growth rate in June was up year-on-year, and the month-on-month growth rate was slightly stronger than seasonal. There are three reasons behind : 1) In the food sub-category, the prices of pork and edible oil continue to rise. 2) Energy related sub-items continue to rise, which has a strong pulling effect on CPI, but has not yet reflected the impact of the recent adjustment in international oil prices. 3) The price performance of the service was stronger than seasonal, boosting the core CPI month-on-month increase to be slightly stronger than seasonal. The inhibitory effect of epidemic prevention and control on residents' demand for service consumption has weakened, and offline service prices have risen again. However, with the relaxation of epidemic control, logistics has improved, residents’ demand for stockpiling has decreased, and the seasonal supply of related products has increased. The prices of fruits and vegetables, eggs, aquatic products, and beef and mutton have fallen rapidly, which is the main drag factor on CPI.
html The year-on-year growth rate of PPI in June continued to fall, and the month-on-month growth rate was the same as last month. Looking at different industries, PPI was flat month-on-month. The drag factor was the price adjustment of domestically priced goods and overseas non-ferrous metals. The supporting factor was the continuation of price increases in the energy-related industry chain. Specifically, the drag factors are: First, under the "weak reality" of , the prices of ferrous metals and non-metallic minerals priced by domestic demand have declined rapidly. Second, the global manufacturing boom has declined, the "recession trade" in overseas markets has intensified, and the prices of non-ferrous metals, which are mainly priced internationally, have fallen sharply. The supporting factors are: First, international oil prices are high, and the price increases in the petrochemical industry chain continue. Second, coal prices are high. With the peak of domestic summer electricity consumption approaching and the resumption of domestic work and production advancing, demand for coal has increased. Under the overseas "energy shortage", the price of thermal coal rose further in June. However, the National Development and Reform Commission's measures to ensure supply and stabilize prices continue to advance, and the increase in domestic coal prices is weaker than that of overseas coal prices.
Looking forward to the second half of the year, uncertainty about the domestic inflation situation still exists, especially CPI. In terms of PPI, the tail-wagging factor will still drive the year-on-year growth rate downward, but there is uncertainty about the changes in new price increase factors: First, the price of bulk commodities priced overseas has recently declined. If " The coming of "recession trade" may push the PPI growth rate downward. Second, the gap between international energy supply and demand still exists. If overseas central banks tighten currency and fail to effectively suppress demand, prices will still have upward risks. Third, if the domestic infrastructure "steady growth" actively develops in the second half of the year and the demand for real estate investment recovers, black goods may experience price increase pressure. In terms of CPI, ’s year-on-year growth center may rise significantly in the second half of the year, and the probability of breaking “3” in a single month is high, which will be the main focus of domestic inflation. In addition to the risk of rising crude oil prices, CPI in the second half of the year will also be disturbed by two factors: First, if service consumption demand further recovers, PPI will continue to lag in transmission to CPI, and there will be upward risks in core CPI. Second, based on the inventory of fertile sows, pig supply and demand will see marginal improvement in the second half of the year, and there will be certain upward pressure on pork prices.
The uncertainty of the domestic inflation situation remains one of the concerns for domestic monetary policy operations. At a time when pork prices are rising rapidly and inflation risks have emerged, the central bank's open market reverse repurchase "land quantity" operation this week has withdrawn currency on a large scale. Perhaps it is because of concerns about the uncertainty of the inflation situation that it has released A policy signal that will gradually guide short-term liquidity back to the center of policy interest rates.
Risk warning: International geopolitical conflicts have escalated; the rise of domestic epidemic risks has hindered logistics and transportation; statistical data bias has led to the actual stock of fertile sows being overestimated.
一
Core CPI growth rate increased
The CPI in June rose by 2.5% year-on-year, an increase of 0.4 percentage points from the previous month. Among them, the CPI food item was 2.9% year-on-year, an increase of 0.6 percentage points from the previous month; the non-food item was 2.5% year-on-year, an increase of 0.4 percentage points from the previous month; the core CPI excluding food and energy increased by 1.0% year-on-year, an increase from the previous month 0.1 percentage points. 6’s CPI was flat month-on-month, slightly stronger than the seasonal pattern of -0.14%, mainly driven by increases in pork, edible oil, energy and other sub-sectors. The month-on-month increase in core CPI was also slightly stronger than seasonal, driven by rising service prices. See specifically:
First, the CPI food sub-item performance is weaker than the seasonal pattern, and the prices of various foods except pork, grain and oil have fallen super-seasonally.
- In addition to pork, grain and oil, the prices of various foods have fallen super-seasonally. The impact of the epidemic on logistics and transportation is one of the important reasons why the wholesale price of vegetable baskets (including fruits, vegetables, aquatic products, livestock products, etc.) in March and April performed better than seasonal performance. With the gradual relaxation of epidemic control, logistics has improved, residents' demand for goods hoarding has decreased, and the seasonal supply of related products has increased. The prices of fruits, vegetables, eggs, aquatic products, and beef and mutton have declined rapidly. In June, all relevant CPI sub-items have experienced a super-seasonal decline.
- Pork prices continue to rise, and subsequent pressure remains high. Since mid-to-late April, as some farmers are optimistic about the market outlook and delay the release of pigs for slaughter, coupled with the impact of boosting confidence in pork purchasing and storage, logistics obstacles and adjustments to pig transportation policies in some areas, the wholesale price of pork has gradually increased. Although logistics obstacles have been lifted to a greater extent since May, the potential supply of pork extrapolated from the stock of fertile sows on the supply side has decreased significantly since July, while on the demand side, the peak pork consumption season is approaching and the epidemic has stabilized. Further increases and synchronized improvements in supply and demand have accelerated the rise in pork prices since late June, and it is expected that the upward pressure on pork prices may continue in the third quarter.
- Edible oil prices have risen super-seasonally for five consecutive months. In June, the food sub-item of the CPI remained unchanged month-on-month; the edible oil sub-item increased further month-on-month, which was stronger than the seasonal pattern and may have been affected by the delayed transmission of the previous rise in international food prices. However, as crops in the northern hemisphere began to be harvested, the United States and Europe ushered in a bumper grain harvest, and the Fed's interest rate hikes suppressed commodity risk appetite, international CBOT wheat, corn and soybean oil futures prices have all adjusted significantly since mid-to-late June. Prices in early July fell by 21.4%, 20.2% and 27.1% respectively compared with those in early June. The subsequent role of grain and oil prices in driving the CPI upward may tend to ease.
Second, energy-related sub-items continue to rise, which has a strong pulling effect on CPI. html Energy-related transportation fuel prices rose 6.6% month-on-month in June, lagging to reflect the impact of rising crude oil prices from late May to early June, mainly because the adjustment of domestic refined oil prices slightly lagged behind market changes. However, since mid-June, international crude oil prices have adjusted significantly, and the contribution to the energy-related component of the CPI in July is expected to turn negative.
Third, service price performance was stronger than seasonal, boosting the core CPI growth rate. The inhibitory effect of epidemic prevention and control on residents' demand for service consumption has slowed down, and offline service prices have resumed their rise. In June, the CPI service sub-item increased by 0.2% month-on-month, which was stronger than the seasonal pattern of 0.12%; the month-on-month increase in tourism, household services and other sub-items was stronger than the same period in 2020 and 21. National Bureau of Statistics interpretation shows that air ticket and travel prices increased by 19.2% and 1.2% respectively, an increase of 15.0 and 0.8 percentage points respectively from the previous month. Hotel accommodation prices increased by 0.3% from a 0.7% decrease in the previous month. Looking forward, if the impact of epidemic prevention and control policies on domestic demand further weakens and offline consumer demand recovers quickly, combined with the lagging impact of social financing growth and the upward growth of PPI daily necessities prices, core CPI may fluctuate in the second half of the year. Upward.
二
The year-on-year growth rate of PPI for daily necessities continued to climb
The year-on-year growth rate of PPI in June continued to fall, and the month-on-month growth rate was the same as last month.PPI increased by 6.1% year-on-year, falling for 8 consecutive months from the historical high; the month-on-month increase was unchanged from the previous month, while the increase in May was 0.1 percentage points, and has fallen for 3 consecutive months.
Looking at the breakdown, the month-on-month increase in PPI production materials turned from positive to negative in June, and the month-on-month increase in living materials remained unchanged from the previous month. The transmission to CPI still exists. Production materials fell 0.1% month-on-month, while rising 0.1% last month, and the month-on-month growth rate turned from positive to negative. However, among the various sub-categories of production means, only the processing industry weakened month-on-month, while the mining and raw material industries increased month-on-month growth. Living materials increased by 0.2% month-on-month, which was the same as last month. It did not follow the narrowing of production material prices, and the year-on-year growth rate further improved compared with last month. Among them, the month-on-month growth rate of the clothing sub-category continued to increase, reaching a single-month high since statistics were collected in 2011, which was 0.1 percentage points higher than the average of the same period from 2015 to 2021. High crude oil prices have pushed up the cost of raw materials in the textile industry, and the recovery of social scenes after the relaxation of epidemic prevention and control has increased demand for clothing. The month-on-month growth rate of the three sub-categories of food, general daily necessities and durable consumer goods has declined, but the food category is still at a high of 0.5% month-on-month. In addition, The month-on-month performance of the CPI clothing sub-item is 0.1 percentage points higher than the average value for the same period from 2015 to 2021, and the transmission of PPI to CPI-related items is faster.
Looking at different industries, PPI in June was unchanged from the previous month. The drag factor was the price adjustment of domestically priced goods and overseas non-ferrous metals. The supporting factor was the continuation of price increases in the energy-related industrial chain.
There are two factors that drag down the month-on-month performance of PPI: First, under the "weak reality", the prices of ferrous metals and non-metallic minerals priced in domestic demand have declined rapidly. . In 3 and April, the domestic epidemic risk has risen, but the commodity market and the industry are in harmony. Expectations for "stable growth" in investment are strong, price adjustments are weak, and high-frequency indicators such as blast furnace operating rates are rising. However, the actual recovery speed of domestic demand is relatively slow. Commodities such as steel and cement are facing the suppression of "weak reality". The Fed's interest rate hike and the rise of US dollar index have suppressed commodity risk appetite. The mining of ferrous metals and non-metallic minerals The PPI of the dressing and smelting processing industries both declined. Second, international nonferrous metal prices fell. The global manufacturing boom has declined, and "recession trade" has intensified in overseas markets. The prices of nonferrous metals, which are mainly based on international pricing, have fallen sharply. At the end of June, the closing prices of copper, aluminum, lead, and zinc dropped by 12.8% and 12.3% respectively from the end of May. %, 11.9%, 19.7%. Affected by this, the PPI of my country's non-ferrous mineral mining and processing, non-ferrous smelting and processing, metal products and other industries all fell month-on-month in June.
High energy prices have provided support for the month-on-month performance of PPI: First, international oil prices are high and price increases in the petrochemical industry chain continue. The PPI growth rates of the midstream and upstream oil and gas mining, petroleum and coal processing, chemical fiber, chemical raw material products, rubber and plastic products and other downstream textile and textile industry industries all increased month-on-month. Second, coal prices are high. With the arrival of the domestic peak electricity consumption in summer and the advancement of domestic work and production resumption, demand for coal has increased. Amid the overseas "energy shortage", thermal coal prices further rose in June, with the Indonesian thermal coal guide price and the average price of thermal coal at the European ARA port rising by 17.5% and 12.0% respectively compared to May. However, the National Development and Reform Commission continued to advance its measures to ensure supply and stabilize prices, and severely cracked down on illegal activities such as price gouging and collusion in price increases. The increase in domestic coal prices was weaker than overseas. In June, the PPI of the coal mining and washing industry increased by 0.8% month-on-month, which was higher than that in May. The monthly growth rate was 1.9 percentage points higher.
