On February 18, a report entitled "Mild rise in expected stable prices in the year" was published. According to the article, the National Bureau of Statistics released data on January 15, 2019 on the National Consumer Price Index (CPI) and the Industrial Producer Price Index (PPI). CPI rose 1.7% year-on-year, the lowest level since February 2018; PPI rose 0.1%, a decline of 0.8 percentage points from last month.
Industry insiders said that the overall price situation was stable at the beginning of the year, and the future expectations remained stable. The impact of the "pig cycle" inflection point or the advance to the two quarter will be gradually slowed down or even eliminated by the effect of base effect and time lag. CPI may fluctuate moderately in a reasonable range during the year, with an increase of 2% to 2.2%. At the same time, macro-policy counter-cyclical adjustment efforts or further increase, sound monetary policy also has greater space to focus on "stable growth".
Price trends are generally stable
Data show that CPI rose 0.5% in January. Among them, food prices rose by 1.6%, an increase of 0.5 percentage points over last month, affecting CPI rise by about 0.31 percentage points; non-food prices fell by 0.2% from last month to increase by 0.2%, affecting CPI rise by about 0.19 percentage points.
In response, Dong Yaxiu, Director of the Urban Department of the National Bureau of Statistics, said, "The prices of fresh vegetables, fresh fruits and aquatic products rose by 9.1%, 2.3% and 2.0% respectively due to the cold weather and the approaching Spring Festival. The prices of mutton, beef and eggs rose by 1.8%, 1.7% and 0.5%, respectively. The above six factors together affected the CPI increase by about 0.32 percentage points. Among the non-food prices, the prices of air tickets, travel agency fees and long-distance bus tickets rose by 15.9%, 6.4% and 2.8% respectively, which affected the CPI by about 0.15 percentage points.
On a year-on-year basis, CPI rose by 1.7%, down 0.2 percentage points from last month. According to Dong Yaxiu's analysis, food prices rose by 1.9%, 0.6 percentage points lower than last month. Pork prices fell by 3.2%, an increase of 1.7 percentage points over the previous month. Non-food prices rose by 1.7%, the same rate as last month. Gasoline and diesel prices fell by 6.2% and 6.5% respectively, falling year-on-year for two consecutive months.
Food prices, especially meat prices, have an important impact on CPI. Zhang Yu, chief macroeconomic analyst of Huachang securities, said that because of the lifting of the pig ban in some provinces, the gap between the various regions of the country has been narrowed, and the price of pork in Southern China and Yangtze River Delta has descended. At the same time, relevant departments have strengthened the "point-to-point" transportation of major producing and marketing provinces and regions, guaranteed the necessary pork supply near the Spring Festival, and made the price rise and fall within a reasonable range but not up.
Lian Ping, chief economist of Bank of Communications, said that the core CPI excluding food and energy rose by 1.9%, a slight increase of 0.1 percentage points over last month, and the overall trend of CPI remained stable.
For PPI, although the ring-to-ring decline was 0.6%, the decline was 0.4% narrower than last month, and the downward trend was moderated. Pan Yuzhang, a macroscopical researcher at Xiangcai Securities Research Institute, said that PPI's growth in January fell continuously from the same period last year, mainly due to the decline in the prices of means of production with a larger weight. But in the medium term, industrial demand and corporate earnings have shown signs of marginal recovery. The gradual rise in oil prices and production prices will help to repair PPI. In addition, the centralized introduction of local special debt and infrastructure projects in the first half of the year also helps to hedge the risk of PPI deflation, which can be controlled in the whole year.
"Pig cycle" inflection point or early arrival
It is worth mentioning that, influenced by the African swine plague, many agencies predict that the turning point of pork cycle (pork price rise) that will not arrive in 2020 is expected to advance to the middle of 2019, and will interfere with the trend of CPI in the second half of 2019. It is expected that CPI will rise in the second half of the year.
CITIC Securities chief analyst clearly believes that despite the short term CPI in the end of the Spring Festival has dropped slightly, but the whole year, pork prices will continue to rise CPI upward.
Pan Yu Zhang said that in January, CPI tended to be more affected by seasonal factors. The trend of CPI in the whole year still depends on the trend of pig prices and oil prices in the coming period. He pointed out that, influenced by last year's African swine fever, the number of sows on behalf of pig production capacity decreased, and the "pig cycle" has basically bottomed out. The turning point of pork prices is expected to come in the two quarter.
Tang Ke, director of the market and Information Technology Department of the Ministry of agriculture and rural areas, said that the pig price in the second half of 2019 should be optimistic. According to the Ministry of agriculture and rural monitoring, in December 2018, the national pig population dropped 4.8% compared to the same period last year, and the sow herd store decreased by 8.3% compared with the same period last year, and the early warning line fell by more than 5% for 3 consecutive months. This means that the number of pig stock coming to the market in the second half of 2019 is relatively small, and the possibility of the rise in pig prices is greater.
"This year's moderate price rise is expected." Ning Jizhao, deputy director of the National Development and Reform Commission and director of the National Bureau of Statistics, said recently that the supply of agricultural products is adequate and the balance between supply and demand of industrial consumer goods is generally stable.
Regarding the PPI trend of market concern, Huang Wentao, chief analyst of CITIC's macroeconomic and fixed income research team, pointed out that in the short term, the prices of iron ore, crude oil and other commodities have rebounded, such as the lower superimposed base and the increased probability of social finance stabilization, which support demand, etc. PPI growth is expected to rebound in the coming months compared with the same period last year.
Counter-cyclical regulation will be strengthened
Experts believe that inflation during the year is not an important consideration of monetary policy, and this month's decline in CPI and PPILO supermarket expectations may lead to more positive changes in monetary policy, interest rates still have downward space, sound monetary policy or more space to focus on "steady growth".