Text/Wang Enbo

  In the context of the inflation rate in many economies around the world hitting a 40-year high, China's latest price data showed a sharp contrast.

  The latest data released by the National Bureau of Statistics on the 9th showed that in October, the consumer price index (CPI) rose by 2.1% year-on-year, a decrease of 0.7 percentage points from the previous month; the producer price index (PPI) increased from 0.9% in the previous month. was down 1.3%.

  Analysts believe that China's price movement has remained generally stable and inflationary pressures have eased.

However, the year-on-year growth of CPI and PPI both fell, which also caused the market to worry about deflation.

Fall in vegetable prices offsets rise in pork prices

  Wang Qing, chief macro analyst of Dongfang Jincheng, analyzed that the CPI in October fell relatively quickly. Except for the increase in the base in the same period of the previous year, it was mainly due to the decline in vegetable prices in the month, which offset the impact of the increase in pork prices and dragged down food prices. CPI rose.

  According to official data, in October CPI, food prices rose by 7.0% year-on-year, a decrease of 1.8 percentage points from the previous month, affecting the CPI rise of about 1.26 percentage points.

  Among food, the price of fresh vegetables has changed from an increase of 12.1% in the previous month to a decrease of 8.1%; the price of fresh fruit has increased by 12.6%, and the increase has dropped by 5.2 percentage points from the previous month; the price of pork has increased by 51.8%, and the increase has increased by 15.8 percentage points from the previous month.

  At the same time, the decline in international oil prices in the previous period also drove the price of domestic refined oil products lower month-on-month, and the year-on-year increase narrowed.

  In October, non-food prices rose by 1.1% year-on-year, a decrease of 0.4 percentage points from the previous month, affecting the CPI rise of about 0.88 percentage points.

Among them, the prices of gasoline, diesel and liquefied petroleum gas rose by 12.5%, 13.5% and 5.6% respectively, all of which fell more.

  From a month-on-month perspective, the CPI rose by 0.1% in October, a decrease of 0.2 percentage points from the previous month.

Among them, food prices rose by 0.1%, a decrease of 1.8 percentage points from the previous month; non-food prices continued to remain flat.

  In addition, the core CPI, which excludes food and energy prices, rose 0.6% year-on-year in October, the same increase as the previous month.

  Looking ahead, pork prices, which are the main "pushers" of prices, have slowed down, which is expected to keep the CPI down.

  "The current rate of increase in pig prices has actually exceeded the range that fundamentals can support." You Chunye, chief macro analyst at Pacific Securities, said, reviewing the experience of the past few rounds of pig cycles, except for the "super pig cycle" caused by African swine fever , the current round of pig cycle to reduce production capacity is not large, but the price increase is much higher than the previous few times.

Among them, there may be cases where farmers are overly reluctant to sell based on the experience of the previous pig cycle.

Pork prices have started to fall since November, and the trend is likely to continue for some time to come.

  Wang Qing predicts that under the prospect that pork prices have basically peaked, vegetable prices have declined year-on-year, and weak consumption will continue to suppress the increase in core CPI, the CPI in November may fall further year-on-year, and prices will stabilize in the fourth quarter. There is no suspense.

Multiple factors lead to a year-on-year decline in PPI

  In October, the PPI changed from a year-on-year increase to a decrease, which was also affected by the high comparison base in the same period last year.

  Among them, the price of means of production changed from an increase of 0.6% to a decrease of 2.5%; the price of means of living rose by 2.2%, an increase of 0.4 percentage points.

Of the 40 major industrial sectors surveyed, 27 saw price increases, 3 less than last month.

  According to estimates, among the 1.3% year-on-year decline in PPI in October, the impact of last year's price changes was about -1.2 percentage points, and the impact of new price increases was about -0.1 percentage points.

  According to expert analysis, in general, the year-on-year growth rate of international bulk commodity prices has declined, and coal prices have been adjusted downward after the peak season, which has been dragged down by the high base effect of last year, which has brought downward pressure on the year-on-year increase in PPI, especially the prices of means of production.

  From a month-on-month perspective, the demand in some industries has increased. In October, the PPI changed from a decrease of 0.1% in the previous month to an increase of 0.2%, ending three consecutive months of negative growth.

The price of means of production changed from a decrease of 0.2% to an increase of 0.1%; the price of means of living rose by 0.5%, an increase of 0.4 percentage points.

  Wang Qing said that since November, international oil prices have risen rapidly, and domestic industrial product prices have continued to show mixed and stable trends. It is expected that the PPI will continue to increase month-on-month, which will drive the new PPI price increase factors to continue to improve. .

However, due to the high base in the same period of the previous year, the PPI tail-raising factor in November was unchanged from October.

Therefore, it is more difficult for the PPI to return to positive year-on-year in November, but the year-on-year decline is expected to converge to between 0.5% and 1.0%.

Is there a risk of deflation?

  "Generally speaking, CPI and PPI prices need to have negative growth for 3 to 6 consecutive months before they can be technically defined as deflation." But in Pang Ming's view, this round of negative PPI growth will not last that long. More is just the influence of "high base effect and tail-raising factor".

  He further pointed out that from the comprehensive trend of CPI and PPI, there is still no risk of deflation in China in the short term.

However, apart from the high base effect and tail-lifting factors, the core CPI was weak and the PPI fell to the negative range year-on-year, reflecting that domestic consumer demand is still weak, superimposed on weak overseas demand.

  Insufficient domestic demand is also one of the main challenges that China's economy needs to deal with.

The current policy should pay more attention to the weak core CPI and the deflationary pressure of PPI, and give priority to boosting domestic demand.

  Wen Bin, chief economist of China Minsheng Bank, pointed out that with the continuous tightening of monetary policies in major economies, the future international commodity prices will change from a unilateral rise in the previous period to wide fluctuations, and the external inflation pressure facing China will generally ease.

Monetary policy should be more "me-based", giving priority to boosting domestic demand and achieving internal balance.

  Pang Ming, chief economist and research director of JLL Greater China, believes that while accelerating the supply-side structural reform, more attention should be paid to demand-side management, and the implementation of the strategy of expanding domestic demand and deepening the supply-side structural reform should be organically Combined, through two-way force and effective coordination on both sides of supply and demand, adhere to a high level of opening up, adhere to the implementation of the strategy of expanding domestic demand, and effectively tap the potential of domestic demand.