Abstract: Overall, although both CPI and PPI were weaker than expected in August, the upward and downward trends of CPI remained unchanged this year. XML:NAMESPACE PREFIX = "O" />;

Source: Founder Medium Futures Co., Ltd.

Summary:

Overall, although CPI and PPI in August were both weaker than expected, the upward and downward trends of CPI in the year remain unchanged. As overall inflation declined, the probability of slowing down in the GDP deflator index in the third quarter increased. The difference between CPI and PPI turned positive for the first time in 19 months. commodity prices, sporadic domestic epidemics, weather and other factors are the main impacts of inflation in August. CPI weakened as various new price increases significantly slowed down and overshadowed the decline in the base. Among them, the price increase of pork, fresh vegetables and , , all dragged down food prices. Fuel prices have fallen along with the decline in international oil prices. Coupled with the sluggish prices of transportation, rent and other services under the epidemic, non-food items have also been significantly dragged down, and at the same time, it helped core CPI to remain stable at a low level. The sharp decline in PPI growth rate is mainly driven by new price drop factors, and the base impact is relatively small. The difference between PPI and PPIRM narrowed to 1.9%, and the top-down price transmission continued. Commodity prices fluctuated in August, with a slight rebound overall, but the impact on the domestic market lags behind, and the impact is also concentrated in the upstream. The black industry chain is still the biggest hit in the industry. We expect that the focus of CPI changes in September will still be on the performance of pork and energy prices. Currently, the price of vegetables and pork rebounds slightly beyond the price of energy such as steam and diesel. Coupled with the impact of low base, CPI may rebound slightly, and continue to fluctuate upward trend this year, with the high point slightly exceeding 3%. The slowdown in the year-on-year growth rate of commodity prices will continue to drag down PPI, especially the upstream industries. In addition, the PPI base is about to rise significantly. Coupled with the impact of the risk of overseas economic recession on commodity prices, the probability of a significant increase in PPI month-on-month is low. It is not ruled out that PPI will experience negative growth in September (the latest October) and will gradually stabilize in the later period of the fourth quarter.

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1. National Bureau of Statistics Data Announcement

National Bureau of Statistics Data released by the National Bureau of Statistics showed that in August, China's CPI increased by 2.50% year-on-year, down 2.70% from the previous value, and was less than the market's expectations of 2.8%; the year-on-year growth rate of PPI was 2.30%, significantly lower than the market's expectations of 3.1%, and further accelerated the decline from the previous value of 4.20%. In addition, the year-on-year growth rate of core CPI continues to maintain a relatively low of 0.80%. ;;? XML:NAMESPACE PREFIX = "O" /;;;? XML:NAMESPACE PREFIX = "O" /;? XML:NAMESPACE PREFIX = "O" /

2. The main sub-items weakened comprehensively. The CPI decline exceeded expectations. In terms of

CPI, the overall CPI year-on-year growth rate showed a significant decline, while the month-on-month growth rate was significantly weaker than the seasonality, and it significantly dropped below the 5-year average. From the main sub-item or classification methods to see year-on-year growth, both food growth and non-food growth rates have declined slightly. The growth rate of consumer goods has also declined, while the growth rate of service sub-items has remained stable, which is also the main factor supporting the stability of core CPI. From a month-on-month perspective, the CPI of food, non-food and consumer goods is significantly weaker than the seasonality and is lower than the 5-year average, especially the CPI of non-food products is significantly lower. Service and core CPI margins are seasonal but below the 5-year average. The situation shows that the overall weakening of the growth rate of food and non-food prices is the main factor dragging down the CPI in August. Service prices have also fallen, but the amplitude is relatively small, so the core CPI has basically remained stable.

main sub-item in food. The year-on-year growth rate of grain prices fell slightly, and the year-on-year increase of edible oil prices accelerated. On a month-on-month basis, the two are lower than He Gaoyu's five-year average level, and the absolute price increase of edible oil is still high. The year-on-year growth rate of fresh vegetables has slowed down significantly, and the year-on-year growth rate of fresh fruit prices has also declined slightly. On a month-on-month basis, the increase in fresh vegetables fell from the July high and was marginally weaker than seasonality, and the marginal performance of fresh fruits was consistent with seasonality, both of which were lower than the 5-year average. The year-on-year growth rate of livestock meat prices accelerated slightly, among which pork prices continued to accelerate, beef prices remained stable year-on-year, and the decline in mutton prices narrowed. On a month-on-month basis, the growth rate of pork prices has dropped significantly, and the base remains stable, while the growth rate of beef has remained unchanged, and the price of mutton has accelerated slightly. Among other protein foods, the year-on-year decline in aquatic products narrowed, the growth rate of eggs slowed down, and the milk products basically remained unchanged. On a month-on-month basis, eggs and milk performed weaker than seasonality, while aquatic products were in line with seasonality.The situation shows that the pig output of leading enterprises has accelerated, and the supply has begun to rise in the early stage of the downstream frozen meat out of the warehouse; demand weakened due to the high temperature and the epidemic, and the pork prices that had risen sharply in the early stage have turned to stable. The price of fresh vegetables is affected by the increase in the market of vegetables in the north, and the high temperature and drought weather in the south have a short-term impact on vegetable supply in the second half of the month. The price of fresh vegetables has dropped first and then risen within the month, but generally falls back. Most sub-item seasonal factors are not significant, and we still need to be wary of the slow and continuous upward pull of the pig cycle on food CPI and overall CPI.

non-food prices. The year-on-year growth rate of clothing and clothing and footwear prices has dropped slightly, and the month-on-month performance is basically in line with the seasonal trend. The prices of residential sub-items, rent, water, electricity and fuel have slowed down year-on-year. The month-on-month performance is significantly weaker than seasonality, especially rent. The prices of daily necessities and services also slowed down year-on-year, especially household appliances, which slowed down by 0.4% year-on-year. On a month-on-month basis, the above sub-items maintained a significant fluctuation since the second quarter, and fell from the month-on-month growth in July. The year-on-year growth rate of transportation and communication prices continued to decline significantly, with fuel in vehicles slowing down by 4.3% year-on-year, but the decline in communication tools prices narrowed. On a month-on-month basis, the fuel of transportation and communications, especially vehicles, was significantly weaker than seasonal, and communications tools fell from their July highs on the month-on-month basis but the base was relatively low. The prices of cultural, educational and entertainment have accelerated slightly, but the price increase in tourism has decreased. On a month-on-month basis, it was super seasonal due to its weak performance in July. Healthcare prices still did not change much year-on-year, and the month-on-month fluctuations were not obvious. The year-on-year growth rate of other supplies and services has also rebounded from a low level. The non-food situation shows several characteristics: First, the continued weakening of international oil prices is still transmitting to the domestic fuel consumption level, reducing hydropower fuels and transportation fuels. Second, under the influence of the epidemic, some transportation costs such as air tickets and transportation rental fees have declined (combined with fuel influence), and the increase in rent costs has been significantly weaker, and some levels of tourism prices have also been affected. Third, the growth rate of household appliances has declined, and the continuous slowdown of PPI has begun to have a negative impact on the core products of CPI.

Overall, the year-on-year growth rate of CPI in August fell beyond expectations, and fell slightly from the high this year, significantly weaker than seasonality on a month-on-month basis. The significant slowdown in the previous period overwhelms the impact of the decline in the base. The sub-item shows that the food CPI pullback fell from its July high, especially when pork slaughter increased and demand weakened, the price increase slowed down significantly, coupled with the decrease in the price increase of fresh vegetables. The non-food changes are in line with our previous view that the downward impact of tourism prices and international oil prices will continue to appear in August, reflecting the decline in international oil prices, the sluggish prices of transportation, rent and other services under the epidemic, and the continued decline in PPI on the weakening of the pull-up of CPI in core commodities, which are also important factors for the stability of the core CPI at a low level. We believe that the focus of CPI changes in September still needs to be on the performance of pork and energy prices. At present, the prices of vegetables and pork rebounded slightly beyond the prices of energy such as steam and diesel, and the low-base CPI will rebound slightly. It is expected that the CPI center will continue to upward trend this year, with the high point above 3%.

3.PPI continues to accelerate the downward trend and may be approaching negative growth

PPI, the overall year-on-year growth rate of PPI continues to decline significantly, new depreciation factors are still obvious, and the month-on-month base continues to increase slightly. On the margin, the month-on-month growth rate of PPI narrowed slightly to -1.2%, significantly lower than the five-year average. The year-on-year growth rate of PPIRM slowed down more significantly, so the difference between PPI and PPIRM continued to narrow to 1.9%. The year-on-year growth rate of living materials in major categories decreased slightly, while the year-on-year method of production materials slowed down significantly. On the previous month, the data on living have shown a significant decline and turned to negative growth, while the means of production have maintained a significant negative growth. Specifically, the negative growth rates of the mining industry, raw materials industry and processing industry in the production means have expanded, basically remained flat and narrowed respectively. Among living materials, the growth rate of food and durable consumer goods has dropped significantly on a month-on-month basis.

points in the industry. There are differences in the growth rate of PPI in upstream industries. The PPI of the oil and gas mining industry has declined, and the PPI of the coal mining industry has declined more significantly. The PPI of nonferrous metals and non-metallic ores has dropped slightly, and the negative growth of the PPI of ferrous metals mining has expanded slightly.In the midstream raw material industry, only the utility PPI accelerated, and the PPI in non-metallic ore, rubber, plastics, and chemical industries all fell slightly, the non-ferrous metal processing PPI showed negative growth, and the negative growth of ferrous metal processing PPI expanded. Most of the PPIs in the midstream processing and assembly industry have declined, while the PPIs in general equipment and transportation equipment manufacturing have declined, and the PPIs in electronic manufacturing have turned negative. Most of the downstream industries' PPIs also fell, among which the food manufacturing industry, agricultural and sideline food processing industry, and textile industry maintained a relatively high level, the PPI of the pharmaceutical manufacturing industry fell slightly, and the PPI of the automobile manufacturing industry increased by 0 year-on-year. Commodity prices fluctuated in August, with a slight rebound overall, but the impact on the domestic market lags behind. The black industry chain is still under the most obvious impact. Starting from September, the year-on-year growth rate of commodity prices fell again, which will still have a negative impact on PPI, especially the upstream industries.

Overall, the year-on-year growth rate of PPI continued to decline significantly in August, mainly due to the impact of new price decline factors, and the month-on-month base also continued to increase slightly. The year-on-year slowdown of PPIRM was more obvious, with the difference between PPI and PPIRM narrowing to 1.9%. Structurally, the negative growth rates of mining industry, raw materials industry and processing industry in the production means of production have significantly expanded, basically remained flat, and narrowed respectively. Commodity prices fluctuated in August, with a slight rebound overall, but the impact on the domestic market lags behind, and the impact is also concentrated in the upstream. In terms of the industry, the black industry chain is still the biggest hit. The year-on-year growth rate of commodity prices in September still fell slightly, which will continue to drag down PPI, especially upstream industries. In addition, the PPI base is about to rise significantly. Coupled with the impact of the risk of overseas economic recession on commodity prices, the downward trend of PPI remains unchanged, and it is not ruled out that the possibility of negative growth in September (the latest October). PPI will gradually stabilize in the later period of the fourth quarter.

This article comes from the financial world