Starting at the end of September 2024, the domestic public opinion environment and internet attention were both drawn to the fluctuations in the financial market, and this situation continued after the National Day holiday in October. During this special phase of converging attention, many people overlooked some important economic signals and changes in trends.
On Sunday, October 13th, the National Bureau of Statistics released the latest consumer price index and producer price index for residents in September, also known as CPI and PPI. The signals and realities released in this latest price statistics are worth everyone's attention.
Under the heat of the stock market, many people's attitude towards the actual situation of the economic fundamentals and the real changes in the domestic economic environment, if it is an indifferent or careless attitude, then many results have already been predetermined.
1
What is the specific situation of the consumer price index for residents in September 2024?
The data released by the National Bureau of Statistics on Sunday shows:
In September, China's Consumer Price Index (CPI) rose by 0.4% year-on-year, a decrease of 0.2 percentage points from the previous month;
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The producer price index for industrial products (PPI) decreased by 2.8% year-on-year, an increase of 1.0 percentage points from the previous month.
Both CPI and PPI were below expectations.Before the data release, the median forecast of seven institutions collected by the media showed that the CPI rose by 0.6% year-on-year in September, and the PPI decreased by 2.5% year-on-year.
The key to studying macroeconomic data lies in looking at the structure. The following focuses on the year-on-year price changes of various goods and services in September:
First, let's look at the year-on-year changes:
In September, the prices of food, tobacco, and alcohol rose by 2.3% year-on-year, affecting the CPI (Consumer Price Index) increase by about 0.66 percentage points. Among them, the price of fresh vegetables rose by 22.9%, affecting the CPI increase by about 0.48 percentage points; the price of fresh fruits rose by 6.7%, affecting the CPI increase by about 0.13 percentage points; the price of livestock and poultry meat rose by 3.8%, affecting the CPI increase by about 0.12 percentage points, among which the price of pork rose by 16.2%, affecting the CPI increase by about 0.21 percentage points; the price of aquatic products rose by 2.0%, affecting the CPI increase by about 0.04 percentage points; the price of eggs decreased by 4.1%, affecting the CPI decrease by about 0.03 percentage points; the price of grain decreased by 0.7%, affecting the CPI decrease by about 0.01 percentage points.
The prices of the other seven major categories rose by five and fell by two year-on-year. Among them, the prices of other goods and services, clothing, and medical care rose by 3.5%, 1.3%, and 1.2% respectively, while the prices of education, culture, entertainment, and living supplies and services rose by 0.6% and 0.1% respectively; the prices of transportation and communication, and housing fell by 4.1% and 0.1% respectively.
Then let's look at the month-on-month changes:
In September, the prices of food, tobacco, and alcohol rose by 0.5% month-on-month, affecting the CPI increase by about 0.15 percentage points. Among them, the price of fresh vegetables rose by 4.3%, affecting the CPI increase by about 0.11 percentage points; the price of fresh fruits rose by 2.1%, affecting the CPI increase by about 0.04 percentage points; the price of eggs rose by 2.1%, affecting the CPI increase by about 0.01 percentage points; the price of livestock and poultry meat rose by 0.4%, affecting the CPI increase by about 0.01 percentage points, among which the price of pork rose by 0.4%, affecting the CPI increase by about 0.01 percentage points; the price of aquatic products fell by 0.5%, affecting the CPI decrease by about 0.01 percentage points.
The prices of the other seven major categories rose by one, remained unchanged by three, and fell by three month-on-month. Among them, the price of clothing rose by 0.8%; the prices of living supplies and services, medical care, and other goods and services remained unchanged; the prices of transportation and communication, education, culture, entertainment, and housing fell by 1.3%, 0.3%, and 0.1% respectively.
In fact, except for transportation and communication, the prices of other goods have been rising significantly.In it, food prices rose by 3.3%, while non-food prices fell by 0.2%;
Among food items, the prices of fresh vegetables, pork, and fresh fruits increased by 22.9%, 16.2%, and 6.7% respectively, with all experiencing an expansion in the rate of increase.
If people often go grocery shopping, they will have a feeling that the price increase of vegetables in October was even larger, and they have become more expensive than before.
Therefore, it can be expected that the increase in food prices in October will be even higher.
In addition, a while ago, the prices of public utilities such as water, electricity, and gas have already increased significantly.
That is to say, compared with the past, although the overall price increase is not high, and there is even the so-called "deflation" risk, the prices related to the daily life of the residents, such as food, vegetable prices, meat prices, fruits, etc., have increased significantly.
Overall, the rise in the CPI has broken the doubts about "deflation" in China's economy.
From a structural perspective, the domestic price increase is not optimistic, and the current situation is a man-made "inflation" with obvious administrative intervention:
The current domestic CPI structure clearly reflects the situation of directly and significantly increasing the price level by skipping the supply and demand relationship.
And the key to driving the price index is to significantly increase the prices of public utilities such as water, electricity, and gas, as well as vegetables that are indispensable for residents' daily consumption.These are conclusions directly drawn from the data published by the National Bureau of Statistics, without any over-interpretation or speculation.
When viewed in conjunction with the Producer Price Index (PPI), what does the current domestic economic environment actually look like?
In September 2024, the national industrial producer出厂 price index decreased by 2.8% year-on-year, with the year-on-year decline further widening compared to the previous month.
The data situation is not optimistic, what does this mean? It implies sluggish production demand, reduced production by enterprises, economic downturn, and wage cuts for workers.
For individuals, wage cuts are not the worst situation; the worse scenario is unemployment.
Another situation that deserves attention is the divergence between the Consumer Price Index (CPI) and PPI (In macroeconomic analysis, CPI and PPI are two highly watched indicators. They reflect price levels from different dimensions, and their relationship, especially their "divergence," has become a focal point of close attention for economists, policymakers, and investors):
The widening divergence between CPI and PPI directly reflects the intensification of weak demand in the industrial sector.
The divergence phenomenon between PPI and CPI often foreshadows the compression of corporate profit margins, which, if prolonged, may pose challenges to the job market and social stability.The variation in the scissors gap is absolutely something to pay attention to, as it may reflect certain issues in the economy, such as supply and demand imbalances, obstacles in the cost transmission mechanism, or inflationary pressures.
When combined with the CPI of September, the current domestic economic environment is characterized by significant price increases that are closely related to the ordinary residents' sector, while the income of the residents' sector is significantly decreasing. Moreover, under the reality of the scissors gap, the residents' sector also needs to cope with the continuously increasing risk and pressure of unemployment.
The presentable and attractive content can be seen in official interpretations and analyses from various securities firms. Here, we will only discuss the essential viewpoints that are not visible or not easily seen in the market.
The conclusion is not complicated: under the performance of the National Day consumption enthusiasm and the significant ups and downs of the domestic stock market, the domestic consumption field and the situation of domestic demand are not optimistic.
Trend analysis: What changes will there be in the domestic economic fundamentals and operating conditions in the future?
Of course, the data of CPI and PPI have a certain degree of lag, especially since the end of September, the country has been continuously making efforts from multiple dimensions such as monetary policy and financial markets. A rational forecast suggests that the relevant economic data for October may undergo significant changes.
However, some trend-related issues will not be reversed in the short term.
Based on the data from September and the policy changes since the end of September, we would like to share the following trend perspectives with everyone:
1. Looking solely at the data structure of CPI, the short-term bearish trend for optional consumption is worth taking seriously.What is discretionary consumption? Travel, automobiles, durable goods, and luxury items are all considered part of it, of course, there are far more than these.
One can imagine that in daily life, spending money only when absolutely necessary is what constitutes discretionary consumption.
2. The continuous decline of the Producer Price Index (PPI) may also indicate a lack of economic demand, which could negatively impact corporate sales and profits, thereby constituting a bearish factor for the economic fundamentals.
3. The release of effective demand requires the stability and continuity of income and employment in the household sector, especially before there is a noticeable increase in income and a clear shift in the job market. The rise in prices, particularly of necessities, can put pressure on the economic well-being and is not a good thing.
4. Why focus on prices? Because prices are closely related to the lives of ordinary people and directly reflect the cost of living for the general public.
Nowadays, almost every household has a mortgage, and after paying the mortgage, money is essentially spent on food, especially for ordinary people and grassroots groups.
Therefore, the impact of rising prices on the general public is really significant.
What could be worse?
Prices rise, but the income of the general public does not, which is the situation of stagflation defined in economics.
Of course, it is also important to observe the actions and statements of the state. The stock market initiated at the end of September is a significant tool, but its subsequent effects and its impact on the economic fundamentals still need to be observed.In short, moving forward, it is a phase that continues to test the fundamentals of the domestic economy and the resilience of the household sector. Do not hold too high expectations for the economy to improve in the short term.