CICC: US CPI in November fell far short of expectations, and inflation will peak in the first quarter of next year
The Zhitong Finance App learned that CICC released a research report saying that the overall and core CPI of the US in November fell far below expectations and previous values. The overall ratio was 2.74%, the same forecast was 3.06%, and the previous value was 3.01%; the core ratio was 2.63%, the same forecast was 3.03%, and the previous value was 3.02%. Still maintaining the judgment that the US inflation problem is minor, the overall and core CPI will peak in the first and second quarters of next year, respectively. This year, the market raised concerns about inflation due to tariffs twice in April and August, but actual results showed that there was no real impact on both, and market concerns increased. This is a view that has always been emphasized. The core reason is the word “slow”. As long as transmission is slow enough (for example, the current tariff rate borne by US residents is around 10-15%), then it will not prevent the Federal Reserve from cutting interest rates, and it can also leave a lot of room to solve other problems.
CICC's main views are as follows:
The first inflation data after the government shut down was also finally released. As a result, it “exploded” and declined like a cliff.
The overall and core CPI for November fell far short of expectations and previous values. The overall YoY was 2.74%, the same forecast was 3.06%, and the previous value was 3.01%; the core YoY ratio was 2.63%, the same forecast was 3.03%, and the previous value was 3.02%. The month-on-month ratio is also similar. In October, due to the government shutdown, the average for the October-November period was only 0.10%, the previous value was 0.31%; the core was 0.08%, and the previous value was 0.23%.
The forecast before the data was released fell short of market consensus, but the results were lower than the bank's predictions, which were already at the low end of the spectrum of major institutions, so it's no exaggeration to call it a “big surprise.” After the data was released, US stocks surged, and interest rates on US bonds and the US dollar declined slightly. Interest rate cuts in January are expected to rise slightly, but they are still below 30%.
How do you understand the data? First, the market is skeptical about this data, because statistics are missing due to the government shutdown, and because it was 0.3% month-on-month, which could plummet below 0.1% this month, and also because even service prices and rents, which have always been resilient, have collapsed, so it is difficult not to “have reason” to doubt whether this data is “interfering or problematic.” Second, although the market has reason to question whether there can be such a sharp decline, the downturn itself is not a big problem. Because the peak of the impact of tariffs has passed, and US employment, consumption, and PMI data have also generally weakened in recent months, the fall in prices is not surprising. This is also consistent with the assertion that inflation is not a big problem.
What will happen next? 1) This month's data is a bit too “good” to be true; on the contrary, it makes it difficult for the market to discern the truth or falsehood. It is speculated that if it only falls moderately, the impact on US bond interest rates and the Fed's interest rate cut expectations will be even greater. After the data was released, changes in US bond interest rates and the Fed's interest rate cut expectations were limited. The estimate is related to this factor. Next, we can only wait for December inflation to clarify the actual situation.
2) Market sentiment will be boosted in the short term. It's not a bad thing to say, but market concerns are too good to be true.
3) Further strengthening of expectations for future interest rate cuts, in addition to confirmation of inflation in December, it is still necessary to wait for the nomination of a new chairman.
4) Still maintaining the judgment that the US inflation problem is minor. Overall and core CPI will peak in the first and second quarters of next year, respectively. This year, the market raised concerns about inflation due to tariffs twice in April and August, but actual results showed that there was no real impact on both, and market concerns increased. This is a view that has always been emphasized. The core reason is the word “slow”. As long as transmission is slow enough (for example, the current tariff rate borne by US residents is around 10-15%), then it will not prevent the Federal Reserve from cutting interest rates, and it can also leave a lot of room to solve other problems.
Therefore, compared to the recession or even stagflation that the market is worried about, the benchmark situation for the US economy and credit cycle next year is “repaired” and may even “overheat” under certain circumstances.