Industrial profits under pressure in February CPI and PPI scissors have a record high

Abstract Bureau of Statistics, CPI rose year on year fell sharply in February to 0.8%, PPI rose 7.8% hit a new high since September 2008. Although the commodity market in February showed a slight decline, compared with the same period in 2016, it is undoubtedly in the calendar...
According to statistics from the Bureau of Statistics, the year-on-year increase in CPI fell sharply to 0.8% in February, and the PPI rose 7.8% to a new high since September 2008. Although the commodity market in February showed a slight decline, compared with the same period in 2016, it is undoubtedly at a relatively high level in history, which has promoted a large increase in PPI year-on-year. From the perspective of the industry, the prices of petroleum, coal, steel and other products are high, which in turn drives the ex-factory prices of industrial products to continue to rise. However, the rise in industrial prices cannot be accompanied by rising food prices. PPI and CPI have such a large deviation, the market is worried that the price increase factor of PPI will be transmitted to CPI in the future. At present, this conduction effect is not very obvious.
The price hikes of the four major industrial raw materials of crude oil, coal, steel and rubber are transmitted in layers, and the cost of raw materials for midstream enterprises has increased, and they have been transmitted to the end consumption sector.
The price increase of bulk commodities has not diminished the transmission of PPI.
The National Bureau of Statistics released data on March 9. In February, the ex-factory price of industrial producers nationwide rose by 7.8% year-on-year and 0.6% quarter-on-quarter. Among them, the price of production materials rose by 10.4% year-on-year, and the total level of impact on PPI rose by about 7.6 percentage points.
The 21st Century Business Herald noted that in February of this year, the increase in PPIMR (industrial product purchase price) was significantly higher than that of PPI. The difference between the two scissors has increased from 0.8 percentage points in December last year to 2.1 percentage points in February. Profitability is under pressure.
It is worth noting that since March, the commodity market has seen a significant decline. On March 8 and 9 two days, the Mandarin China Commodity Index has fallen by 2.6%. If the commodity is adjusted this month, the March PPI Index will also be Will fall back.
Jing Chuan, chief economist of Zhongda Futures, pointed out that the recent adjustment of commodity market is mainly affected by financial factors, but from the perspective of volatility, once the Fed rate hike meeting is over, commodities will rebound immediately.

Industrial profits under pressure?
Although the commodity market in February showed a slight decline, compared with the same period in 2016, it is undoubtedly at a relatively high level in history, which has promoted a large increase in PPI year-on-year.
The PPI's quarter-on-quarter and year-on-year growth also confirmed the above judgment. In February, the PPI rose by only 0.6%, while the year-on-year increase reached 7.8%.
From the perspective of the industry, the prices of petroleum, coal, steel and other products are high, which in turn drives the ex-factory prices of industrial products to continue to rise.
“In February last year, bulk commodities reached their lowest point since the last round of decline. By the end of February this year, iron ore, steel and coal prices rose by 85%, 78.11% and 55.27% respectively, which became the main factor driving PPI. Factors." Zhuo Chuang Information analyst Fang Juntao said on March 9.
It should be pointed out that the increase in the ex-factory price of industrial products is lower than the increase in the purchase price of industrial products.
The 21st Century Business Herald found that the above-mentioned turning point occurred in November 2016, when the purchase price of industrial products rose by 3.5% year-on-year, while the ex-factory price rose by 3.3%.
The above trend has continued to this day, and the difference between the two is also increasing month by month, which is also highly correlated with the trend of the commodity market during the same period.
During the National Day of 2016, after the provinces and municipalities intensively introduced real estate control measures, the commodity market hotspots were extended from steel and coal to chemical products such as rubber.
The reaction to the micro level is the price surge that started at the end of 2016.
During this period, the price increase effect of the four major industrial raw materials of crude oil, coal, steel and rubber was transmitted in layers, and the cost of raw materials for midstream enterprises increased, and all the way to the end consumption field.
Taking the household appliance industry as an example, a large number of non-ferrous metals and steel plates are needed in the production process of white-electric enterprises. If you want to maintain the original profit level, you can only raise the price response of the products, so there will be a collective price adjustment of home appliances before and after the Spring Festival. .
For the upstream enterprises in the industrial chain, it is currently at a staged high point of profitability.
CITIC Futures' recent research meeting pointed out that the profit per ton of steel billets in Tangshan area is above 400 yuan, while the profit per ton of strip and rebar exceeds 500 yuan.
“The profit of 500 yuan per ton of steel can only be considered relatively low, and some enterprises can reach 700 yuan to 800 yuan.” Liu Jie, a researcher in the steel industry of CITIC Futures, said on March 9.
However, in Fang Juntao's view, if the difference between PPIRM and PPI scissors continues to expand, the cost of enterprises will increase rapidly, and the profit margin will be affected, which will lead to a slowdown in procurement of such enterprises and a suppression of PPI.

March PPI is expected to narrow
“Coal, steel, petrochemical, non-ferrous metals, the so-called “three blacks and one color” production materials prices have contributed 80% to the increase in PPI.” Ning Jizhen, deputy director of the National Development and Reform Commission, held a press release on March 6. Said at the meeting.
In this case, then in anticipating the trend of PPI in March, it is undoubtedly also should start from the price trend of the above products.
Since March, the Wenhua Commodity Index, which tracks 30 kinds of commodities such as copper, has seen a continuous decline this week. The declines on March 8 and 9 are even more magnified. Can this round of decline continue?
Jingchuan pointed out that the short-term correction of commodities is mainly affected by financial factors. First, the central bank is constantly withdrawing funds, and the probability of the Fed raising interest rates has increased greatly, which puts pressure on the overall commodity market. At the same time, the increase in US crude oil inventories exceeded expectations, resulting in a sharp drop in national crude oil prices, which caused a drag on the commodity market.
It should be pointed out that the above is only a short-term factor, and the logic of continuing to take the lead in the medium and long-term support has not yet changed fundamentally.
Further subdivided into the industry, steel and non-ferrous metals are driven by demand and are expected to continue to rise in the first half of the year.
Xia Xuejun, a researcher in the Southwest Futures Steel Industry, told reporters on March 9 that the reasons for supporting steel prices in the short term are still difficult to falsify. It is only after the data of crude steel production and real estate investment growth in January and February are released that the supply and demand relationship can be truly seen. how is it.
At present, the downstream demand is still in the stage of gradual heavy volume, but it is only affected by the capital in the short term. If the demand is gradually released in the future, the steel price will rise again.
"From our research, the recent rolling mills in Hebei and the construction of construction sites in Beijing have been restricted, so the recent black-collective collective decline trend. However, after 15th of this month, the steel market is expected to pick up." Liu Jie said.
Jingchuan also pointed out that the supply and demand environment of non-ferrous metals in the first half of this year should be significantly better than last year. Now it is in the peak season of non-ferrous metals consumption, but the characteristics of the peak season have not yet appeared. The orders of downstream enterprises have not yet reached market expectations. “Unless the new major bad blows Otherwise, non-ferrous metals will remain strong."
In contrast, the fundamentals of coal are relatively poor. The relevant person in charge of the Economic Development and Reform Commission of the National Development and Reform Commission said recently that “there is no need to implement large-scale coal mine production reduction measures in 2017.” The statement was also widely interpreted as “276 working days” production policy will be relaxed. .
In terms of crude oil, US crude oil futures and Brent crude oil futures have fallen more than 6% and 5% respectively this month.
It is not difficult to see that there are large differences in the factors affecting the PPI trend, but only in terms of the trend from March to the present, the domestic PPI index growth rate is expected to narrow in March.

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