Both CPI and PPI are "negative", but "double deflation" is difficult to sustain or is beneficial to the structural adjustment of monetary policy.

SMM News: national Bureau of Statistics data showed on the 9th, November CPI month-on-month and year-on-year decline, PPI month-on-month from flat to rising, year-on-year decline narrowed. Analysts believe that the current situation may constitute a "double deflation" situation, but the price deflation situation is conducive to the structural adjustment of monetary policy in the future.

They also point out that "double deflation" has occurred many times in history, but only sustained and deep double deflation will trigger a shift in monetary policy or substantial easing. In this case, the bond market will enter a more certain stage of recovery, and the stock market will also be boosted.

According to the National Bureau of Statistics, CPI fell 0.5% in November from a year earlier, the lowest level in nearly 11 years and the first negative growth since October 2009. In addition, PPI fell 1.5 per cent in November from a year earlier and rose 0.5 per cent from a month earlier.

Dong Lijuan, a senior statistician in the city department of the National Bureau of Statistics, said that core CPI, excluding food and energy prices, continued to remain stable, rising 0.5% from a year earlier, the same rate for five consecutive months. The impact of the new price increase was about-1.5% of the year-on-year decline in PPI in November.

Hu Yuexiao, a macro analyst at Shanghai Securities, believes that the price "deflation" situation is conducive to the structural adjustment of monetary policy in the future, increasing the space for the monetary authorities to reduce costs and lower the height of the interest rate curve.

He also said that from the month-on-month data, the current price operation is still relatively stable, and the core CPI, which can better reflect the real operation of prices, is also relatively stable. Therefore, despite the decline in the year-on-year data, the current "deflation" is still a kind of "pseudo-deflation", a correction of last year's excessively high base.

The chief fixed income analyst at Citic Securities clearly expects that the current "double deflation" situation will not last too long. There will be a rebound in inflation under the base effect in the first and second quarters of next year, but the overall inflationary pressure is limited and will not strongly restrict monetary policy.

Wang Qing, chief macro analyst of Oriental Jincheng, also believes that after the first quarter of next year, CPI will return to positive growth compared with the same period last year, and there is little risk that the economy will continue to enter a state of deflation. International oil prices and domestic industrial product prices will continue to rise in the short term, PPI will continue to rise month-on-month in December, and the year-on-year decline is expected to further converge to about-1 per cent.

Looking forward to next year, industry insiders expect CPI to maintain a negative range of about a quarter under the influence of falling pig prices, and PPI will quickly recover under the base effect in the first quarter of next year.

As domestic manufacturing investment demand is expected to gradually pick up, while real estate and infrastructure investment remains resilient, supporting domestic industrial product prices. Core inflation indicators are expected to pick up significantly.

Guojun Macro Hua Changchun team pointed out that there will be "re-inflation" in 2021, but it is difficult to have "high inflation". Huatai Securities Research News also believes that the re-inflationary situation is gradually becoming clear, and if the advance of vaccine production leads to an earlier restart of the global economy, it may lead to a shortage of commodities in the short term and further push up international commodity prices.