In June, PPI and CPI met expectations. In terms of CPI, due to the impact of the epidemic and the demand for frozen meat decreased, the increase in demand for fresh pork caused pig prices to rise again, and vegetables also rebounded seasonally, supporting the significant improvem

htmlJune PPI and CPI meet expectations. In terms of CPI, due to the impact of the epidemic and the decline in demand for frozen meat, the rise in demand for fresh pork has led to a new rise in pork prices. Vegetables also rebounded seasonally, supporting the significant improvement of food items, while the non-food items are still weak. In terms of PPI, it is mainly driven by the rebound in oil prices, and black and nonferrous metals are also relatively strong. Overall, inflation is on the rise, and under the disturbance of the supply side, inflation may rise to a certain extent. But the core logic has not changed. In fact, this time, global liquidity cannot directly boost investment and consumption demand. Not only domestic consumption demand, but also in countries such as the United States and Europe are also relatively sluggish. Therefore, the currency does not enter the entity, but enters the financial market, especially the stock market. Therefore, the inflation of asset prices is more obvious than the inflation of real consumer goods. Although the CPI rebounded to a certain extent in June, it was driven more by the unseasonal rainfall in the southern rainy season, resulting in the rebound of food prices such as vegetables. But looking back, based on the high base of pork prices last year, and the base of oil prices in the fourth quarter of last year was also relatively high, so the overall trend of CPI will continue to gradually decline in the next few months. Local supply disturbances will not lead to significant inflation increases. As inflation levels gradually decline rather than gradually rise, monetary policy will pay more attention to marginal changes in economic momentum to decide on future adjustments to interest rate levels. After the overall interest rate rebounded sharply in the past 2-3 months, the interest rate level basically returned to the beginning of the year. In the future, interest rates are expected to fall at a high level in the case of a decline in inflation pressure and a local slowdown in economic momentum. The rise in vegetable and pork prices in

1, supports the significant improvement of the food items, while the non-food items are still weak

6 CPI fell 0.1% month-on-month and 2.5% year-on-year. In June, the core CPI and the prices that did not contain fresh vegetables and fruits fell by 0.1% month-on-month and remained the same month-on-month respectively, while the two rose by 0.9% and 3.2% year-on-year. The food items rose by 0.2% month-on-month due to the rise in prices of vegetables and pork, which was the main reason for the upward trend of CPI. Food rose by 11.1% year-on-year, while non-food prices fell by 0.1% month-on-month. The improvement in CPI is supported by the food items, but the non-food items continue to be weak, but the price increase in vegetable prices caused by the rainy season is short-term and it is difficult to support the recovery of CPI for a long time.

Food: The CPI food item turned down to rise in June, up 0.2% month-on-month. The flood disaster in the south and the epidemic in Xinfadi market in Beijing affected the supply of vegetables. The price of fresh vegetables rose by 2.8%, while the price of fresh fruit fell by 7.6% after the new fruit was launched; pork prices reversed the decline, up 3.6% month-on-month, beef prices fell 0.5% month-on-month, and mutton rose 0.4% month-on-month. In addition, egg prices fell 3.7%. Overall, the rise in food items is mainly driven by the upward trend in prices of vegetables and pork, while the prices of fruits and eggs are still falling.

Non-food: Non-food fell 0.1% month-on-month in June. Although international oil prices continued to rise in June, the domestic epidemic repeatedly suppressed residents' travel and optional consumption, with air tickets and tourism prices falling by 6.% and 1.8% respectively. Therefore, the overall transportation and communications items still fell by 0.3% month-on-month, and the education, culture and entertainment items also fell by 0.3% month-on-month. In addition, the discount on summer clothing also turned the price of clothing to fall by 0.2%, residential items fell by 0.2% month-on-month, and daily necessities and services items fell by 0.1% month-on-month.

2 and oil prices led the rise, and black and nonferrous metals rebounded

6 PPI fell 3.0% year-on-year and 0.4% month-on-month, in line with our expectations. The price of means of production turned from a decline to a rise, up 0.5% from the previous month, affecting the overall level of industrial producer prices to rise by about 0.40 percentage points. Among them, the price of the mining industry rose by 4.9%, the price of the raw materials industry rose by 0.7%, and the price of the processing industry rose by 0.2%. The price of living materials turned from a month-on-month decrease of 0.3% to a 0.1% increase from a month-on-month decrease of 0.03 percentage points, affecting the overall level of industrial producer prices to rise by about 0.03 percentage points. The positive month-on-month reaction of PPI largely reflects the lagging impact of the rise in oil prices. Since international oil prices are transmitted to the domestic market at a slow pace, after backtesting, international oil prices generally lead PPI by about one and a half months, so it is mainly the impact of the rebound in oil prices from April to May. This factor will give way to domestic fundamentals after oil prices stabilize. In addition, black and non-ferrous metals both rose 1.9% month-on-month, and black rose significantly. Many of the recent rise in nonferrous metal prices have been affected by the supply side, but the demand side benefits from new infrastructure and is also relatively strong.After excluding the impact of oil prices, industrial products prices did not rise beyond expectations in June, and the economic rebound was actually not as fast as the recent risky assets rebounded.