CPI rose 4.5% year on year last month and achieved price control target

In 2019, the national consumer price rose by 2.9% over the previous year, achieving the annual price control target of "about 3% increase in consumer price" set by the government work report. On January 9, the National Bureau of statistics released the national CPI (consumer price index) and PPI data in December 2019. Data shows that in December 2019, CPI rose 4.5% year-on-year and was flat on a month on month basis. PPI fell 0.5% year-on-year, 0.9% lower than last month. The reporter of the daily economic news noted that from the sub data of this month, pork price, an important factor leading the CPI rise in the early stage, fell 5.6% month on month, which is also the first time that pork price fell in the sub data of CPI since June 2019. The first monthly month on month decline of pork price the published month on month data shows that in December 2019, the price of livestock meat decreased by 3.8%, affecting CPI by about 0.28 percentage points, of which pork price decreased by 5.6%, affecting CPI by about 0.27 percentage points. Driven by the change of pork price, the month on month trend of food price in December also dropped significantly. According to the data, the price of food, tobacco and alcohol decreased by 0.2% month on month, which affected the CPI decrease by about 0.05%.

As for the reasons for the decline in the price of pork on a month on month basis, Shen Yi, Senior Statistician of the city Department of the National Bureau of statistics, explained that with the positive changes in pig production, the central and local reserves of pork have been put in, the import volume has increased, and the supply tension of pork has been further eased, and the price has been reduced from 3.8% in the previous month to 5.6%. Under the influence of the decrease of pork price, the price increase of beef and mutton dropped from 2.8% and 1.3% to 0.1% and 0.2% respectively, while that of chicken and duck changed from 4.3% and 3.6% to 4.9% and 1.9% respectively. The supply of eggs was sufficient, and the price dropped by 5.5% and the drop increased by 4.8%. Is there a trend in this month on month decline of pork price? According to an analysis by an expert on the daily economic news, from the situation reflected in the CPI sub index in December and the current pork production situation, the "turning point" of pork price may come ahead of time. Zhang Deli, chief macro researcher at YueKai securities, believes that when the price of pork reaches a high level, changes in supply will become more sensitive.

In December 2019, the number of pigs released to the market increased by 14.1% on a month on month basis, and the pigs supplemented in November of that year will also be released in the second quarter of this year, while the pork consumption demand in the second quarter is generally weaker than that in the first quarter. In the second quarter, when the pork price is expected to fall, the farmers may speed up the market before and after the Spring Festival, leading to the fall of pork price ahead of time. After the festival, CPI growth will gradually fall back, the reporter of "daily economic news" noted that at present, in addition to pork price factors, other factors affecting CPI trend generally remain stable. For example, data in December 2019 showed that core CPI excluding food and energy prices rose 1.4% year-on-year, the same increase as last month. Yang Chang, head of the policy group of China Thailand Securities Research Institute, said that the core CPI excluding food and energy prices rose 1.4% year-on-year in December, the same as last month and still in a controllable range. At present, CPI's month on month growth has fallen, and the higher year-on-year growth is mainly affected by the lower base of last year. At present, the rise of pork price has been significantly eased. Does this mean that the situation of CPI's year-on-year growth at a high level of more than 3% is expected to come to an end temporarily? In this regard, Zhang Deli analyzed that the pressure of CPI inflation from pork has been eased, and the focus will turn to international oil price. It is expected that the conflict between the US and Iran will be difficult to continue, and crude oil pricing will gradually return to supply and demand itself. Due to the dislocation of the Spring Festival, the year-on-year increase of CPI in January may break through, and then gradually fall back, the gap between CPI and PPI will narrow, and the constraint of monetary policy from inflation will be weakened.