Inflation is expected to disappear

April 12, 2017, the National Bureau of Statistics released March price data. March CPI rose 0.9% year on year, the former value of 0.8%. PPI rose 7.6%, the former value of 7.8%.
 
Non-food upstream difficult to reach food fell, CPI rose only slightly. Non-food prices after the holiday season rose (up + 2.3%), but it is difficult to offset the food prices continue to fall sharply (-4.3%), CPI following the 0.8% in February after the low value, The Food: pig, dish two lower, “achievement” inflation in the doldrums. March high-frequency data show pork prices -4.5% year on year, pig cycle continues to fall in the downlink space. CPI pork sub-year-on-year -3.2%, the overall CPI contribution of -0.09 percentage points. Although the environmental pressure is large while large-scale farms exist double column behavior, but the relative increase in supply makes the future pig prices is difficult to substantially upward, while the recent major feed corn and soybean meal prices down, pork absolute price upside is limited. Although the second half of last year, compared to the first half of the pig has come down, but we believe that this year’s pork prices will fluctuate around 14-15 yuan, the possibility of a small upside down, so still dragged down. March fresh vegetable prices fell 7.9%, down 27.9%, the CPI contributed -0.95 percentage points. Spring season dislocation and warm winter together this spring season, fresh season prices ahead of early fall, superimposed last year’s high base makes the March fresh vegetable prices continue to decline significantly. Looking ahead, it is expected that with the gradual decline in April high base factors, fresh vegetable prices year on year decline is expected to narrow, but the overall range is limited. In addition, March fruit and aquatic products year on year growth rate has rebounded, slightly offset the decline in meat prices on the negative impact of CPI.
 



Non-food: did not appear on schedule obvious upward. March Development and Reform Commission twice lowered oil prices led to CPI traffic fuel items narrowed 0.7 percentage points to 16.9% year on year. Rents fell 0.5 percentage points to 2.8% last month, dragging down the entire living class fell to 2.4% last month. Although the rent began to appear in the first two months of this year, but appeared in March, so there is no clear evidence that high prices have begun to transfer to the rent, follow-up need to observe. In addition, the price of health care (+ 5.3%), education (+ 2.3%), clothing (+ 1.3%), daily necessities and services (+ 0.7%) increased, but limited. On the whole, did not promote non-food than expected.
 
PPI growth followed by weak, corporate earnings improved or weakened. Commodity up momentum weakened, PPI ring to continue down. March PPI compared with last month fell slightly by 0.2 percentage points to 7.6%, growth of 0.3%. Petrochemicals, March oil prices and oil and natural gas extraction sectors fell by 0.6% and 0.1% respectively, while the international oil prices fell by the same period, and the oil and natural gas extraction industry fell by 0.6% and 0.1% respectively. Metals, the main products such as rebar, plate, wire, angle and other gains were narrowed, ferrous metal smelting and rolling processing industry fell 3.3 percentage points year on year to 36.8%; non-ferrous metal prices generally fell, the main product electrolysis Copper, aluminum ingots, zinc ingots year on year growth rate narrowed more than 7 percentage points. We believe that the Trump infrastructure policy has not landed, raw material prices are expected to weaken; domestic real estate inflection point or temporary investment in infrastructure investment pressure; CRB index is close to the previous high point, upward pressure gradually, the above factors are constrained Commodity future upside. PPI chain has been narrowed for three consecutive months, we believe that the recent negative probability of a low, but the probability of maintaining a stable price, PPI year-on-year will be significantly down, the end of the year or near 0, the annual average or At about 5%. Affected by this, we believe that the improvement of corporate earnings will be weakened last year, but the growth rate is still positive range. At the same time, although the price center has been uplifting last year, but the future price of industrial products or survival is expected, this round of inventory cycle or near the end.
 
Unsurprisingly, inflation expectations continue to fall. “Up” point of view or has been falsified. We believe that inflation this year, the market is expected to basically clear the basic can be eliminated, and even stagflation-related views are basically in the next two or three quarters of economic growth is expected to fall before the pressure was falsified. First, the real estate market in the more stringent tightening policies around the background, the future price will appear to a certain extent down, the relevant service industry prices upside down; secondly, although the first two months of this year’s credit scale than expected, but throughout the Year, the slowdown in credit expansion will be a high probability event, the possibility of pushing up inflation in the currency also reduced; Moreover, from the recent social consumer data can be seen, even after the actual price of the cumulative year after year to reach the beginning of the year The lowest point, which means that the terminal demand does not support the CPI rose sharply; Finally, the history point of view, PPI and CPI non-food trend is relatively high, but on the one hand non-food gains and PPI upside down, on the other hand PPI ring to continue Downstream led to PPI high point has been, do not support CPI non-food up.
 
The second half of the “high point is not high”, moderate inflation throughout the year. Since the end of last year OPEC limited production agreement reached, the market generally raised the forecast for the international average oil price this year, and the second half of the limited production efforts to maintain or strengthen, perhaps the CPI is expected to rise the main factors. But now we believe that oil prices or will not appear more than expected. First of all, although the recent impact of the US war in Syria, risk aversion has led to oil prices rose to about $ 53, but the probability of short-term events; secondly, the European side, Le Pen’s support rate lower, the French election political risk There is a slow release, the German election over the expected results of the possibility is not large, the second half of the occurrence of black swan in Europe the probability or decline; Moreover, the second half of the production agreement is still pending pending, the United States shale oil and crude oil inventory pressure Has been restricting oil prices; Finally, in February 2016 after the oil prices began to rise, the high base of the gradual accumulation does not support the future upside is too large. Therefore, the oil price or will not be to raise this year’s CPI average over the expected factors, even if the third quarter due to base reasons, CPI receding stage high, but we think or only 2.2%, the annual average is expected to be lower than last year 2.0 %s level. Moderate inflation will not be a monetary policy adjustment considerations or constraints.