August CPI rose to 2%, monetary policy space narrowed

The National Bureau of Statistics announced on the 9th that the national consumer price level (CPI) rose by 2% year-on-year in August, up 0.2 percentage points from July. The market generally believes that prices will start to enter the upward channel again from August. Based on this judgment, even if the economic growth data released at the same time is “poor”, the space for future monetary policy will be narrowed by price factors, and the focus of steady growth will be skewed toward fiscal policy. Price CPI or re-entry into the uptrend channel CPI rebounded in August, food price increases are considered to be the most important factor. Food prices ended the previous four-month decline, with a 1.5% increase being the highest in six months. Among them, due to the abnormal climate in China, the price of fresh vegetables rose by 14.3% from the previous month, the highest in 7 months, up 23.8% year-on-year, up about 15 percentage points from the previous month; pork prices also appeared for the first time in 7 months. rise. "From the reasons, the CPI data in August has risen, mainly due to the rebound in agricultural prices. According to the statistics released by the Bureau of Statistics, in August, food prices rose by 3.4% year-on-year, affecting the overall level of consumer prices rose by about 1.08 percentage points year-on-year. Among them, the prices of fresh vegetables, fresh fruits, aquatic products, grain and oil are all rising. The price of pork is also rising from the bottom. The price of eggs is the most obvious. The national egg price has risen by nearly 20% in a month, about 80%. The egg price in the district and city has exceeded 5 yuan per catty." Hu Chi, a researcher at the Research Institute of the State-owned Assets Supervision and Administration Commission, commented. More importantly, the year-on-year increase in CPI in August is likely to be not a short-term perturbation rebound, but the beginning of price re-entry into the upward channel. Cao Yuanzheng, chief economist of Bank of China , believes that in September and even the fourth quarter, CPI will show a slow upward trend. "Inflation is coming back!" Dong Xianan, chief economist of Beijing's leading international financial information company, said that the data in July has warned that the consumer price index has rebounded from the previous year, and has risen to the countdown. The overseas liquidity has increased, the climate has weakened the supply of agricultural products, and domestic meat. The rebound in grain prices also implies risks such as rising energy prices and rising meat prices. In August, the manufacturing purchase price index also surged by 5.1 percentage points. The recent drought in the United States and Eastern Europe has led to an increase in international food prices, which is likely to be the main driving force in the early stages of the domestic CPI recovery. According to Pan Xiangdong, chief economist of Galaxy Securities, the price of soybeans on the Chicago Board of Trade (CBOT) has risen continuously and hit a new high on the 4th. The reduction of agricultural production in the United States is a foregone conclusion. This year, global soybean and corn ending stocks will fall to dangerous levels. This may bring greater input inflationary pressure to China. Fan Xin, an analyst at the China Federation of Industrial Economics, believes that it is unlikely that the global food crisis will break out again between 2007 and 2008 under the current economic situation. However, the reduction in grain production will still keep food prices high, which indirectly will cause China's inflation rate to rise. And food prices will gradually pass to the downstream farming industry. Due to the increase in breeding costs, the prices of pork and chicken products will continue to rise in the future, driving the CPI to rise steadily. Nie Zhenbang, former director of the State Grain Administration, also told the reporter of the Economic Information Daily that China’s industrial grain is expanding and some of it needs to be imported. The United States is a big corn producer. Last year, the output reached 372.5 million tons. This year, it is expected to reduce the production by 100 million tons due to drought, which will bring about the problem of raising pig feed prices in China. This will inevitably lead to the price of pork, which is expected to rise in the future due to rising production costs. CIC Securities macroeconomic analyst Xing Weiwei predicted that although the economic growth rate has certain restrictions on inflation, food supply disturbance and international market commodity price fluctuations have an increasing impact on domestic inflation. CPI will rebound to around the end of the year. 3%. Macroeconomic growth may continue to decline While the price rebounds, the economic growth rate is likely to continue to decline. According to the data released by the National Bureau of Statistics on the same day, the added value of industrial enterprises above designated size increased by 8.9% year-on-year in August, down by 0.3 percentage points from July; the total retail sales of social consumer goods deducted by 12.1%, which fell by 0.1 percentage points; The nominal growth rate was 20.2% year-on-year in August, and the growth rate dropped by 0.2 percentage points from January to July. Hu Chi commented: "From the current economic situation, 'steady growth' is still the most important policy objective of macroeconomic regulation and control. In August, China's manufacturing PMI was 49.2%, down 0.9 percentage points from the previous month, hitting a 9-month low. Combined with a series of data released on the 9th, it shows that the current economy is still in the process of downturn, and the economic downturn is likely to be longer than expected. This shows that the current economic operation may be more difficult than expected. Bigger.” Sun Junyi, a macroeconomic analyst at HSBC, also judged that the economy is still going down. She told the Economic Information Daily that due to the weak external demand and destocking activities, the growth rate of industrial added value slowed down again, basically in line with our expectations. Economic growth is still in the downtrend channel, which also supports the recent intensive decision-making layer to approve new infrastructure projects to stabilize growth. The growth rate of infrastructure investment has rebounded, but this is not enough to offset the impact of the decline in manufacturing investment. It is expected that future policies will continue to increase financial expenditures, while loose monetary policy will complement the funding of these infrastructure projects. Judging from the economic data of the past two months, the current difficulty in China's stable economic growth is increasing. To this end, a number of institutions have recently lowered their forecasts for China's economic growth this year. UBS is the latest one, which cut its 2012 and 2013 China economic growth forecasts from the previous 8% and 8.3% to 7.5% and 7.8% respectively. Hu Zhipeng, an economist at UBS, said that in recent months, due to slower export growth and steady growth policies, neither the implementation nor the pace of advancement was as expected, industrial enterprises continued to destock, and real economic activity remained weak. We cut our GDP growth forecasts for the third and fourth quarters from 8% and 8.1% to 7.3% and 7%, respectively. We expect some policy effects to be delayed until 2013, but the base effect and weaker global growth prospects will continue to slow China's GDP growth rate in 2013. It should be noted that we still expect the real economic activity to recover moderately in the fourth quarter, driven by steady growth policies and stabilization of real estate construction activities. Although structural problems and an aging population may slow down the potential growth of the Chinese economy in the medium and long term, we believe that economic activity will achieve a cyclical rebound with the entry into force of the steady growth policy and the end of destocking. Regulating the monetary policy space narrowing Although the economy is still tending to bottom out, considering that prices have begun to rise, there is also upward pressure on house prices in the near future. The market expects that the monetary policy space will narrow, and the focus of the steady growth policy will be biased toward fiscal policy. "At present, China's inflationary pressure is still relatively large, especially since July and August, the price of agricultural and sideline products has increased significantly. Considering that the economy still has a downward trend, the central bank will be in a dilemma of 'wait and see' in terms of monetary policy regulation." Guo Tianyong, director of the China Banking Research Center of the Central University of Finance and Economics, believes. Wang Xiaolu, deputy director of the National Economic Research Institute of the China Reform Foundation, also said that the current macroeconomic policies should avoid excessively stimulating investment. The monetary policy should be basically neutral, and should only be fine-tuned. It is not appropriate to adopt an excessively loose monetary policy. To prevent excessive economic growth, we should focus on fiscal policy in the short term and promote reform in the medium and long term. Dong Xianan holds a similar view. He told the Economic Information Daily: "Inflation and housing prices will inevitably restrict easing. For the rest of the year, inflation risks have risen and the probability of easing has come to an end." Hengtai Securities also said that CPI is expected to be presented in September and the fourth quarter. Looking back, the monetary policy operation space will be limited. In this context, monetary policy will continue to be fine-tuned in the coming period, frequent operations in the open market will continue, and the frequency of use of policy instruments such as deposit and deposit and loan interest rates will be greatly reduced. This has been a sign before. Before the release of the data on the 9th, the National Development and Reform Commission approved 60 infrastructure finance projects on the 5th and 6th consecutive days. It is estimated that the total investment amount is close to one trillion yuan. And the scale of this investment may be overweight. Xu Lin, director of the Finance and Finance Department of the National Development and Reform Commission, said at the annual meeting of the Urban China Plan that the National Development and Reform Commission recently approved several major infrastructure projects, especially the rail transit and inter-city rails of 20 cities. Transportation projects, this is only part of the urban infrastructure construction, there are many other infrastructure, including water plants, sewage treatment plants, garbage treatment plants and so on. However, some economists have suggested that the use of fiscal policy to stabilize economic growth should take more tax cuts than investment. For example, Wei Jining, deputy director of the Macroeconomic Research Department of the Development Research Center of the State Council, said that in the face of the decline in economic growth, it is almost impossible to relax monetary policy, but the rhythm and intensity must be controlled. Otherwise, if the monetary policy relaxes too fast, although economic growth will rebound, inflation will rise at a faster rate. Fiscal policy should be more active. However, on the one hand, government investment should be moderately controlled due to the increasing burden of local government debt. On the other hand, more tax cuts should be used to increase tax cuts. In addition, we should speed up the pilot work of independent issuance of local government bonds, and use the market mechanism to conduct efficiency screening and risk control of local government debt. Wang Xiaolu said that the focus of fiscal policy has shifted from expanding investment to reducing taxes for small and micro enterprises, and expanding government spending to increase the income of small and micro enterprises and their employed people. He Wei, deputy director of the NPC Financial and Economic Committee, also believes that China's current economy should be supplemented by a structural tax reduction policy.

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