The tail-warping factor weakens CPI rising trend in the second half of the year

Recently, the National Bureau of Statistics released the National Consumer Price Index (CPI) in July 2019. Data show that CPI rose by 2.8% in July from a year earlier, and it has been in the "two times" for five consecutive months, with an increase of 0.1 percentage points over last month. Among them, food prices rose by 9.1%, an increase of 0.8 percentage points over last month, affecting CPI by about 1.74 percentage points; non-food prices rose by 1.3%, a decline of 0.1 percentage points over last month, affecting CPI by about 1.04 percentage points.

In food, the price of fresh fruit increased by 39.1%, which was 3.6 percentage points lower than that of last month, while the price of pork rose by 27.0% and increased by 5.9 percentage points. These two items together affect CPI's rise by about 1.22 percentage points. The prices of eggs, chicken, beef, mutton and fresh vegetables rose between 5.2% and 11.4%. Zhao Junye, a researcher at the Institute of Agricultural Information, Chinese Academy of Agricultural Sciences, said that in the first half of the year, due to adverse weather, Southern fruits such as litchi were reduced due to disasters, and the listing of watermelon and melon was delayed, which superimposed on the low stock of apples, pears and other stored fruits. The periodic tight supply of fruit market resulted in the first half of the year, especially in May 5. Fruit prices rose significantly in January and June. In July, with peaches, apricots, plums and other seasonal fruit on the market, fruit prices began to fall. It is worth noting that since April this year, egg prices have stopped falling and rebounded, and have been rising steadily. In response, Zhang Chao, an expert at the Institute of Agricultural Information, Chinese Academy of Agricultural Sciences, said that this was due to the steady and slightly reduced supply of eggs in the market at different stages and the increased demand for eggs at different stages. At the same time, distributors and food processing enterprises at all levels have advanced the time of stock-up and increased the cost of breeding, which together contributed to the rise in egg prices. Zhang Jing, chief analyst of the vegetable market analysis and early warning team of the Ministry of Agriculture and Rural Areas, said that since April, China's vegetable prices have been on a seasonal downward trend, with a "slow before fast" drop in prices. In July, adverse weather phases such as summer rainstorm, flood and persistent high temperature affected seasonal vegetable supply in some producing areas, but low-level operation was still dominant for a period of time.

"Pork price is the main factor affecting the rise of food prices." Liu Xuezhi, a senior researcher at Bank of communications Financial Research Center, said that pork prices are on the upward cycle, and the impact of early African swine plague has led to a rapid rise in pork prices.

According to estimates, in the 2.8% same-rate increase, the upside-down effect of last year's price changes is about 1.2 percentage points, and the impact of new price increases is about 1.6 percentage points.

In July, CPI fell by 0.1% from last month to increase by 0.4%. Dong Yaxiu, Director of the Urban Department of the National Bureau of Statistics, said that the hot weather and excessive precipitation in some areas were not conducive to the production, storage and transportation of fresh vegetables. Prices rose by 2.6%, affecting CPI by about 0.06 percentage points. When laying hens enter the dormant period, the laying rate decreases, and the price of eggs increases by 5.0%, which affects the CPI increase by about 0.03 percentage points. The price of fresh fruits dropped by 6.2%, affecting CPI by about 0.14 percentage points. Experts said that although CPI growth continued to be in the "two times" year-on-year, the food prices that promoted CPI rise are expected to stop rising and falling. There is little room for further price increases in the future, and the overall inflation risk is not high. Fruit prices rose significantly in the first half of the year. However, since July, a large number of seasonal fruits have been on the market, and the prices of all kinds of fruits on the market have gradually fallen. Lu Fangxue, president of China Fruit Circulation Association, said that according to the survey conducted by China Fruit Circulation Association, the total output of apples and pears in 2019 is expected to reach or exceed the historic maximum output. In addition, imported fruits continue to enter the Chinese market, the domestic market has sufficient supply and can fully meet the market demand. Fruit prices will be high. Return to a reasonable level.

From the perspective of vegetable prices, the price in the third quarter is lower than that in the same period of last year. According to Zhang Jing's analysis, vegetable supply in this summer's cold area is relatively sufficient, and the price of vegetable in the first half of this year is higher than that in previous years. The willingness to expand vegetable in the later period is higher. If there is no extreme weather, the vegetable supply situation will be better than last year.

"Egg prices are expected to fall after the Mid-Autumn Festival." Zhang Chao said that at present, the benefits of laying hen farming are better, and the enthusiasm of farmers to fill the fence is rising. After the Mid-Autumn Festival and National Day, the temperature began to cool down, the laying hens'rest period ended, the production capacity resumed, and the supply of eggs increased.

"With the tail-warping factor weakening significantly in the second half of the year, it will ease the pressure of CPI rise, not excluding the possibility of CPI rise falling back in the end of the third quarter and the beginning of the fourth quarter." Liu Xuezhi said. It is worth noting that in the second half of the year, PPI tail-warping factors declined rapidly, and weak demand led to weak new price-raising factors, and PPI may continue to grow negatively in the near future. With the positive macro-policy, expanding domestic demand is an important task in the second half of the year. Promoting consumption and investment will be strengthened. Strengthening efforts to stabilize manufacturing investment and strengthening infrastructure to make up for shortcomings will help PPI gradually stabilize.