SMM, January 10-China's December CPI and PPI data were released this morning. Compared with the smooth operation of prices, the fall in PPI's rate of increase has attracted more attention from the market. In December, PPI rose only 0.9 percent from a year earlier, the lowest level since September 2016. Oil, black and other five major industries together affected PPI growth fell by about 1.71 percentage points compared with the same period last year. The future is concerned about the possibility that PPI will continue to decline to deflation in 2019. Non-ferrous metals all day narrow range shock, SMM believes that for copper prices, the release of PPI data is more emotional impact, the domestic economic weakness and downstream reserves do not see obvious pressure on copper prices.
In December 2018, the ex-factory price of industrial producers across the country (PPI) rose 0.9% from a year earlier, down 1.0% from the previous month. PPI for the whole year was 3.5 per cent higher than the previous year.
Rope Guoqing, a senior statistician in the city department of the National Bureau of Statistics, said: from a year earlier, PPI rose 0.9 percent, down 1.8 percentage points from the previous month.
Among them, the price of means of production rose 1.0 percent, down 2.3 percentage points from the previous month, and the price of means of living rose 0.7 percent, down 0.1 percentage points.
Among the major industries, the oil and gas mining industry rose 4.5 percent, down 19.9 percent from the previous month, while the oil, coal and other fuel processing industry rose 5.7 percent, down 11.9 percent. The chemical raw materials and chemical products industry rose 0.5 percent, down 3.4 percent, while the non-metallic mineral products industry rose 5.3 percent, down 2.1 percent. The prices of ferrous metal smelting and Calendering industries changed from rising to falling, down 2.7%. Together, the price increases and falls in the five major industries have affected PPI growth by about 1.71 percentage points compared with the same period last year.
Zhang Liqun, a researcher at the Institute of Macro-Economics at the National Research Center, said: the downward trend of PPI growth and the current market demand, including the fact that enterprises still have more difficulties at present, then the whole production and management activities are still relatively cautious. In this way, it may lead to a lack of demand for various means of production, so the increase in PPI as a whole will have to fall further.
Huatai macro Li Chao predicted that the year-on-year PPI growth center may continue to decline significantly in 2019; the PPI center forecast for the whole of 2019 will be revised down to + 0.5%. Restricted by the downward trend of the PPI center, it is difficult for industrial enterprises to see a rebound in profit growth in the short term. In 2019, the focus of supply-side reform is more on improving total factor productivity, and the pull of supply-side factors on PPI may be weakened. More attention should be paid to the role of demand-side logic such as infrastructure and real estate. In December 2018, the Politburo meeting focused on countercyclical regulation and stabilizing aggregate demand. Prices in steel, cement and other industries are still likely to benefit in the future, and industrial prices are likely to reflect expectations of policy stimulus in advance.
SMM believes that the weakness of today's PPI data and the return of CPI to the "era 1" are in line with market expectations for the current economic slowdown, and that copper with financial attributes hit a new low in more than a year last week. Copper prices fell mainly because of concerns about China's economic growth and trade frictions between China and the United States, while demand for real estate and cars gradually fell, making it difficult for PPI to change its downward trend from a year earlier. According to the latest research, except for copper pipes, which are boosted by seasonal factors, the downstream operating rate, including wires, cables, copper bars, and so on, has declined noticeably. Near the Spring Festival, there is no obvious improvement in the copper spot market transaction in the reserve stage. Spot side of the whole line into discount, before delivery, the source of large discount is still attractive, downstream still do rigid demand procurement, short-term attention to the cash willingness of the holder.
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