Mild Core Price Rise in July Allows Space for Monetary Policy

category:Finance
 Mild Core Price Rise in July Allows Space for Monetary Policy


Influenced by last years base, the trend of CPI rising and PPI falling in July will be somewhat calmed down in the future. According to many analysts interviewed by economic reporters in the 21st century, the CPI in July may be the peak of the year, and the PPI tends to decline due to the downward pressure of the economy. However, policies such as stable investment, environmental protection and production restriction play a supporting role in PPI.

Although CPI has increased, the overall weakening trend of core CPI (excluding food and energy) has not changed. Inflation has reduced under the restriction of monetary policy. The global interest rate reduction tide has created external space for Chinas monetary policy operation. However, the application of sound monetary policy still needs to be balanced in terms of stabilizing the economy.

Multi-measures to stabilize pig supply

CPI rose by 2.8% in July compared with the same period last year. Food is still the main factor driving up prices. Among them, fresh fruit and pork prices rose by 39.1% and 27% year on year, which affected CPI by about 1.22 percentage points.

In addition, pork and tourism prices rose by 7.8% and 7.5% annually in July, leading the rise in all major consumer goods. CPI rose 0.4% in July, according to the National Bureau of Statistics, pork prices affected CPI by 0.2 percentage points; summer travel increased, air tickets, travel agency charges and hotel accommodation prices rose by 19.3%, 8.6% and 2.2%, respectively, totally affecting CPI by about 0.19 percentage points.

From the monthly average of pork in 22 provinces and municipalities, the base price of pork in June-July was 16-17 yuan last year, and it rose sharply to 20-21 yuan in August-October. Pork is facing a higher price base, with limited room for increase. However, in June, the stocks of live pigs and fertile sows decreased by 25.8% and 26.7% compared with the same period last year, and the productivity further decreased, which supported the pork price. Overall judgment, follow-up pork prices are expected to remain high, but there is limited room to rise. Li He, a researcher at the Institute of International Finance of the Bank of China, told reporters on economic reports in the 21st century.

Luo Zhiheng, a senior researcher at Hengda Research Institute, told reporters on economic reports in the 21st century that pork prices are expected to continue to play an upward role in CPI from a follow-up perspective. With the gradual opening of colleges and universities, the impact of summer consumption on CPI will gradually fade away. Influenced by Sino-US trade frictions, international oil prices have fallen significantly in recent years. The market expects that global economic growth may continue to decline, and oil prices will drag down CPI. In addition, the tail warping effect of CPI will gradually weaken in the future. In summary, the following CPI growth rate may be slightly lower than the previous year, and the main upward pressure is still on pork prices.

In order to calm the rise in pork prices, the production and supply of live pigs are increasing everywhere. On May 16, the National Video and Telephone Conference on Promoting Pig Production and Guaranteeing Market Supply was held. It called for the implementation of the provincial overall responsibility and the vegetable basket mayor responsibility system as the core, speeding up the stabilization and restoration of pig production, fully mobilizing the enthusiasm of farmers to fill the fence, vigorously developing large-scale standardized breeding, and effectively solving the problem that farmers dare not raise pigs. I dont want to raise and cant afford it.

PPI Negative Again

Although residential prices were at a high of 2.8%, PPI fell by 0.3% in July compared with the same period last year.

The ferrous metal mining and dressing industry in which iron ore is located is outstanding. In July, the ex-factory price of ferrous metal mining and dressing industry rose 23.7% year on year, 5.2 percentage points higher than last month, 4.6% higher than last month, and 0.9 percentage points higher than last month. The ex-factory price of ferrous metal mining and dressing industry is far ahead of that of other major industries.

In the first half of the year, the iron ore mining giants cut production, which put pressure on the supply side, and the iron ore market was booming. However, the international mining giants have gradually resumed production in the second half of the year, iron ore port inventory has gradually rebounded, supply-side pressure is expected to gradually ease, and prices have fallen in the near future.

Liu Xiaoguang, associate professor of the National Institute of Development and Strategies, Renmin University of China, told reporters of economic reports in the 21st century that, affected by downward economic pressures, especially insufficient aggregate demand, PPI growth has been significantly reduced since this year. In the first half of the year, it has basically maintained zero growth. Negative growth in July is marginally tight, which does not mean that the economy is in a tight position. The sudden increase of downward pressure also reflects that the situation of insufficient aggregate demand has not changed significantly. The trend of slow downward trend may continue in the second half of the year, and the decline may further expand in the short term.

Follow-up PPI trend has both supporting factors and pull-down factors. At present, the global economy as a whole is in a weak position, and the downward pressure of Chinas economy has increased, which makes it difficult for global industrial prices to reverse significantly in the short term. In the short term, the sharp drop in international oil prices since August and the continued tightening of domestic real estate financing will have a significant negative impact on PPI. But because of last years low base factor, PPI may rebound, but overall remain weak. Luo Zhiheng said.

Meanwhile, in July, the core CPI excluding food and energy increased by 1.6% year on year, slowly declining to 1.6% from 1.9% in January, maintaining a moderate upward trend.

Generally speaking, the moderate CPI increase and PPI decrease create the internal space of monetary policy, while the global interest rate reduction tide creates the external space of monetary policy. It is expected that monetary policy will be marginally loose in the second half of the year, so that it can be better self-centered and timely adjust monetary policy according to changes in domestic economic situation. Liu Xiaoguang said.

Luo Zhiheng believes that the downward trend of non-food CPI and PPI and the opening of interest rate reduction mode by the global central bank have increased the room for Chinas monetary policy to move. The focus of Chinas monetary policy is to adjust its structure. It is expected that in the second half of the year, China will use medium- and long-term structural monetary instruments such as targeted benchmarking to alleviate liquidity stratification and real financing problems.

Source: Responsible Editor of Economic Reporting in the 21st Century: Wang Xiaowu_NF