Consumer demand continues to recover and domestic prices are generally stable
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On August 9, the National Bureau of Statistics announced the data of the national consumer price index (CPI) and the national industrial producer price index (PPI) in July. Among them, the CPI has turned from a decrease to an increase month-on-month, and consumer demand continues to recover; the PPI month-on-month and year-on-year declines have both narrowed, and domestic prices are generally stable.
In July, consumer demand continued to recover, and the CPI turned from a drop to an increase month-on-month. However, due to the high base in the same period last year, it fell back year-on-year. The core CPI excluding food and energy prices picked up significantly, up 0.8% year-on-year, an increase of 0.4 percentage points from the previous month.
From a month-on-month perspective, the CPI turned from a decrease of 0.2% in the previous month to an increase of 0.2%. Among them, the price of food dropped by 1.0%, which was 0.5 percentage points higher than that of the previous month, and affected the CPI to drop by about 0.18 percentage points. Among non-food items, the price of services rose by 0.8%, an increase of 0.7 percentage points over the previous month, mainly driven by the rise in prices of travel services. The price of industrial consumer goods turned from a decrease of 0.4% in the previous month to an increase of 0.3%. Affected by the rise in international oil prices, domestic gasoline prices rose by 1.9%. Prices recovered, rising between 0.7% and 1.2%. In addition, from a year-on-year perspective, the CPI changed from flat last month to a decrease of 0.3%. The year-on-year change from flat to down was mainly due to the high comparison base of the same period last year.
Wen Bin, chief economist of China Minsheng Bank, said that the CPI in July showed the characteristics of “strong month-on-month and weak year-on-year”. From a structural point of view, “weak food and strong service” are the main features. Among them, food is weaker than seasonal performance, which is related to factors such as the abnormal weather performance of the El Niño phenomenon, the weak cycle of pork, and my country’s increase in agricultural product imports. It reflects the rebound in demand for cultural entertainment and tourism among summer residents. Reflecting the current domestic demand is stabilizing and picking up.
Dong Lijuan, chief statistician of the Urban Department of the National Bureau of Statistics, said that overall, the year-on-year decline in CPI is phased. In the next stage, as my country’s economy recovers, the market demand will expand steadily, and the relationship between supply and demand will continue to improve. In addition, the impact of the high base in the same period last year will gradually be eliminated, and the CPI is expected to gradually pick up.
Wang Qing, Chief Macro Analyst of Dongfang Jincheng, said that in addition to the efforts of various localities and departments to expand consumption scenarios, improve consumption conditions, and optimize the consumption environment, the necessity of fiscal policies to promote consumption in stages is also increasing. This includes issuing a certain scale of consumer vouchers and consumer subsidies, and moderately reducing taxes and fees for large-scale consumption such as automobiles, electronics, and home furnishing. This will be the key to boosting the momentum of economic recovery in the third quarter.
In terms of PPI, in July, due to the overall sufficient domestic production and supply, the improvement of demand in some industries, and the transmission of international commodity prices, the decline in PPI narrowed both month-on-month and year-on-year. From a month-on-month perspective, the PPI fell by 0.2%, and the rate of decline narrowed by 0.6 percentage points from the previous month. From a year-on-year perspective, PPI fell by 4.4%, and the rate of decline narrowed by 1.0 percentage points from the previous month.
“On the whole, with the narrowing of the PPI decline in July, the bottom of the current cycle of PPI growth in June has been confirmed. The year-on-year and month-on-month declines of upstream production materials have narrowed, while downstream living materials have rebounded. In the future, as Last year, the high base effect gradually receded, and the year-on-year decline in PPI will continue to narrow.” Wen Bin said.
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