Interpretation of December CPI: pork supply tensions continue to ease, monetary easing remains unchanged
Surging news reporter Zhang Jing
2020-01-09 16:51 Source: Surging News
CICC macro analysts Yuan Yue and Yi Yi believe that the CPI trend in December was generally in line with expectations, and food price inflation fell, rather than food inflation picking up.
Liang Zhonghua, chief macro analyst at China and Thailand, said that the current level of inflation is still high, mainly due to the high pig prices. But looking forward, the production capacity of hogs has gradually recovered, and the pressure of slumping pig prices in the future is also being accumulated. In addition, as long as the fundamentals are falling, monetary policy will be loose.
The 2020 Chinese New Year is in late January. Is there any possibility of "breaking 5" in January CPI? In this regard, economist Deng Haiqing believes that it may be difficult to exceed 5%. Yuan Yue, Yi Yi and others believe that the inflation data at the beginning of the year may be disturbed by the Chinese New Year factors, and the CPI in January has the possibility of "breaking 5".
The tight pork supply situation continued to ease, and the price fell 5.6% qoq
The CPI trend in December was generally in line with expectations, and food price inflation fell, but not food inflation picked up. On a year-on-year basis, the CPI rose 4.5% in December, the same increase as last month. Among them, food prices rose by 17.4%, a decline of 1.7 percentage points, affecting a CPI rise of about 3.43 percentage points.
In food, the price of fresh fruits dropped by 8.0%, and the decline was expanded by 1.2 percentage points. The price of pork rose by 97.0%, and the growth rate dropped by 13.2 percentage points. The prices of beef, mutton, chicken, duck and eggs rose between 7.3% and 20.4%, all falling to varying degrees. The price of fresh vegetables increased by 10.8%, and the increase was expanded.
Among non-food items, medical care, education, culture and entertainment, and clothing prices rose 2.1%, 1.8%, and 0.8%, respectively, and transportation and communications prices fell 0.7%. The core CPI excluding food and energy prices rose 1.4% year-on-year, the same increase as last month.
From a month-on-month basis, the CPI was flat from a 0.4% increase last month. Among them, food prices rose from a 1.8% increase last month to a 0.4% decrease, which affected the CPI by about 0.08 percentage points.
In food, with the positive changes in pig production, central and local reserves of pork have been put on the market, imports have increased, and pork supply tensions have eased further. Prices have increased from a 3.8% increase last month to a 5.6% decrease, affecting a CPI decline of approximately 0.27. Percentage points.
According to data released by the Ministry of Agriculture and Rural Affairs, in the 52nd week of 2019 (that is, December 23-December 27), the weekly average of the total factory price index of lean meat white strip pork in 16 provinces (municipalities) was 43.98 yuan per kilogram. It was down slightly by 0.2% month-on-month and up 149.7% year-on-year.
On January 8, Yu Kangzhen, deputy minister of the Ministry of Agriculture, said that from August to November 2019, the number of pigs slaughtered nationwide continued to decrease from the previous month, and it stopped rising in December. situation.
On the supply of frozen meat, on January 3, 30,000 tons of centrally reserved frozen pork was put on the market. On January 9, a spokesman for the Ministry of Commerce Gao Feng said that he would work with relevant departments to increase the central reserve of meat.
Under the influence of the decline in pork prices, the price increases of beef and mutton fell from 2.8% and 1.3% to 0.1% and 0.2%, respectively. The prices of chicken and duck meat increased from 4.3% and 3.6% to 4.9% and 1.9% respectively.
The supply of eggs was sufficient, the price dropped by 5.5%, and the decline increased by 4.8 percentage points. Affected by cold air and large-scale snowfall, the costs of production, storage and transportation of fresh vegetables and fresh fruits increased, with prices rising by 10.6% and 0.6%, respectively.
Among non-food products, affected by the price adjustment, the price of liquefied petroleum gas rose by 4.0%, and the prices of gasoline and diesel rose by 1.4%.
Pig price rises, oil price rises, currency easing remains unchanged
The CPI for the whole year of 2019 increased by 2.9% over the previous year. National Development and Reform Commission spokesman Meng Wei said at a press conference on December 17 last year that, overall, China's prices have a solid foundation for stable operation, ample supply of industrial and agricultural products, and pig production is gradually recovering. It is expected that the annual CPI increase will be 3 % Within the expected target range.
Zhongtai Macro Chief Analyst Liang Zhonghua believes that the current level of inflation is still high, mainly due to the high pig prices. But looking forward, the production capacity of hogs has gradually recovered, and the hog inventory in November has been normalized, and policies supporting hog production are also being added, and the pressure of slumping pig prices in the future is also being accumulated.
"However, the rise in pig prices and the rise in oil prices are mainly due to the recent conflict between the United States and Iran. Under the influence of rising oil prices, domestic PPI will also rebound in the short term." However, Liang Zhonghua said that whether pig prices or oil prices are rising, as long as Fundamentals are falling and monetary policy will be loose. After all, stable employment is the most important.
Looking forward, the fiscal rhythm is moving forward, which has certain support for the economy, but he believes that the economy will still face greater downward pressure throughout the year. What can really be expected is a more active policy. One is the continuation of China's rate cut cycle. It is the marginal relaxation of real estate policy, the third is the reform of the supply side of the capital market to support the new economy, and the fourth is the marginal expectation of state-owned enterprise reform under ultra-low expectations. In the overall direction, 2020 is not a speculation "cycle", but rather loose liquidity and active policies.
On the other hand, the Spring Festival of 2020 will be in late January. What will happen to the CPI at that time? Is it possible to break the 5?
In this regard, economist Deng Haiqing believes that the CPI high point will appear in January, but it may be difficult to break through 5%. He said that from the perspective of food prices in early January, the increase was relatively weak, especially the price of vegetables has risen to a historical high due to the weather. It is difficult to increase prices further. The market is currently expected to be pessimistic about eggs, and pork prices are the only one. However, considering the government ’s efforts to maintain the stability of pork prices, pork prices are unlikely to soar again, so overall, the CPI during the Spring Festival may be weaker than in previous years, which means that the CPI high point may be difficult to exceed 5%. Within 4.5-5%, at the same time CPI may fall to around 4% or even lower in February.
However, CICC macro analysts Yuan Yue, Yi Yi and others believe that the inflation data at the beginning of the year may be disturbed by the Spring Festival, and the CPI in January has the possibility of "breaking 5." However, the CPI may fall back to around 4% in February. At the same time, the progress of China-US trade negotiations may also affect the trend of inflation. Specifically, if the Sino-U.S. Trade friction is “downgraded” and aggregate demand margins are strong, PPI and core CPI inflation may pick up, and upward pressure on agricultural product prices and overall CPI may ease margins.