source: Haitong Securities Liang Zhonghua
2021-07-10 19:25
Haitong Securities said that the possibility of substantial relief of commodity inflation and consumer deflation in the short term is still low. It is expected that consumption will hardly improve substantially before the epidemic is completely over.
summary
On July 9, 2021, the National Bureau of Statistics announced June 2021 inflation data. CPI rose 1.1% year-on-year, PPI rose 8.8% year-on-year, both fell from the previous month, but PPI is still at a high level.
We believe that the possibility of a substantial reduction in commodity inflation and consumption deflation in the short term is still low.The supply of upstream commodities is still suppressed, coupled with the recovery of overseas service industries to drive oil prices upward, although commodity inflation has fallen from the previous month, the probability of seeing a sharp drop year-on-year is still relatively small. The downstream consumer demand is still weak. It is expected that before the epidemic is completely over, consumption will hardly improve significantly, and it will still face certain deflationary pressures.
1、PPI is still high
PPIThe year-on-year growth rate narrowed slightly.In June, the PPI rose by 8.8% year-on-year, which was still at a high level, while the month-on-month increase fell back to 0.3 percentage points, which was a sharp drop of 1.3 percentage points from May. With the implementation of the “guaranteed supply and stable price” series of policies, the prices of most domestic industrial products have fallen. Including policies such as promoting coal enterprises to increase production and putting in national reserves such as copper, aluminum and zinc, they have driven black gold smelting and non-ferrous smelting prices to fall month-on-month. Although coal mining has risen, the increase has also fallen from May. However, the continued upward trend in international oil prices has significantly expanded the price increase of oil and gas extraction.
PPIThe high probability has peaked, but the short-term downward speed is slower.In terms of demand, the fastest period of domestic investment demand has passed, while the demand for durable goods in the United States has tended to fall, and the next step is mainly to repair the service industry. On the supply side, short-term disturbances in the resource countries are still there, but they can be alleviated in the second half of the year as the vaccine continues to be vaccinated; the current domestic supply guarantee policy has achieved results, but the impact of environmental protection policy implementation still needs continuous attention. As a result, the pressure of rising prices for most industrial products has been significantly eased. In contrast, as the demand for service industries in Europe and the United States is still rising, and the demand for crude oil may continue to recover, oil prices still have room for upside.
2 CPI is still low
CPIThe year-on-year low fluctuated.In June, the CPI rose 1.1% year-on-year and fell 0.4% month-on-month. Among them, affected by the continued ample supply, pork prices continued to drop by 13.6%, which became the main drag on CPI.But even excluding food items, the growth momentum of non-food prices has become weak:The non-food CPI was flat month-on-month (the month-on-month increase was 0.2% for March-May), and the core CPI fell by 0.1% from the previous month.
Specifically, there are two main reasons for supporting non-food CPI prices in the past few months:One is the continuous restoration of the service industry.But this driving factor is6There was a repetition in the month:In June, the service CPI weakened (-0.1%) month-on-month, with a year-on-year growth rate of 1%, which was not as good as the 2% growth before the epidemic, reflecting that the momentum for the recovery of consumption, especially service consumption, is still weak. For another example, look at tourism consumption during the Dragon Boat Festival holiday in June. The number of domestic tourist arrivals recovered to 98.7% of the same period before the epidemic on a comparable basis, while tourism income only recovered to 74.8%. Slow income growth may still restrict the improvement of residents’ spending power.
The second is the transmission of the upstream raw material price increase to the downstream.We removed food from the PPI lifestyle materials and found that non-food lifestyle materials and non-food consumer goods CPI trends are highly correlated. This is mainly because PPI measures the wholesale price of consumer goods, while CPI measures consumer goods’ prices. retail price. Therefore, the weakening of CPI non-food prices is also related to changes in the price of PPI means of living.
In June, the PPI means of production continued to rise month-on-month, but the rate of increase was weakened. However, the prices of non-food means of subsistence in the downstream declined. Among them, durable consumer goods were still driven by upstream prices, while the prices of general daily necessities and clothing dropped significantly.Therefore, as in the previous period, although the upstream price increase partially drove the downstream price, the overall transmission was still obviously not smooth.Therefore, in the future, as the price of industrial products reaches its peak, the price of consumer products may continue to weaken due to the upward driving force.
Therefore, from the above two aspects, non-foodCPIThe repair slope may also be lower than expected.Coupled with the fact that the production capacity of live pigs is still at a high level, the combination of lower pork prices and the high base figure last year is still a drag, and the overall CPI rebound may be slower.
3 Commodity inflation, consumer deflation
If PPI is unlikely to fall significantly, and the upstream price transmission to the downstream continues to be poor, it means that the price difference between the two will continue to put pressure on the profits of mid- and downstream companies. Small and medium-sized enterprises are the main force in absorbing employment, and most of them are located in the middle and lower reaches of the industry. If the middle and lower reaches of the industry continue to be under pressure, it will have an impact on employment and affect the recovery trend of terminal consumption.
We believe that the possibility of a substantial reduction in commodity inflation and consumption deflation in the short term is still low.The supply of upstream commodities is still suppressed, coupled with the recovery of overseas service industries to drive oil prices upward, although commodity inflation has fallen from the previous month, the probability of seeing a sharp drop year-on-year is still relatively small. The downstream consumer demand is still weak. It is expected that before the epidemic is completely over, consumption will hardly improve significantly, and it will still face certain deflationary pressures.
Author of this article: Haitong Macro Liang Zhonghua, Ying Gaxian, article source: Liang Zhonghua Macro Research , Original title: “Bulky Inflation, Consumption Deflation-Comments on June 2021 Price Data (Haitong Macro Liang Zhonghua, Ying Gaxian)”
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