According to the National Bureau of Statistics, CPI increased by 2.3% year-on-year in August, and it is expected to be a "double super" year-on-year, and has been in the "2 era" for two consecutive months.
Since the summer of 2012, CPI has been "crawling around 2%" like a snail for a long time, and has been running below 2% since 2014. As the first reference for price indicators, CPI, which has been silent for many years, has been "up to 2" this time, and the subsequent disputes on inflation expectations have become more public.
Why does the snail run wildly, where will it run, and how long can it last? This article will answer the three aspects of macro cycle, micro deconstruction and supply and demand momentum.
Macro cycle: Stagflation helps, snails run wildly
"If a thing calls like a duck and walks like a duck, then it is a duck." Faced with the current widespread debate on whether our country has entered a stagflation period, the "Duck Law" is the author's basic judgment basis.
7 In July, the author took the lead in pointing out that we have entered a stagflation period since the second quarter of this year. Under the stagflation period, economic growth slowed down and inflationary pressure increased. Major asset allocation should be "cash as king", commodities still have potential, and stocks and bonds need to be temporarily avoided.
From the perspective of "call", according to the classic Merrill Lynch clock framework, when the economy slows down and inflation rises, the economic cycle will show the characteristics of the stagflation period. Since the second quarter of this year, economic indicators represented by the Keqiang Index have been subject to the dual pressure of internal deleveraging disputes and the impact of foreign trade frictions, and have started a downward trend; at the same time, inflation indicators represented by PPI and CPI have both risen; the characteristics of stagflation periods of economic downturn + inflation have emerged.
From the perspective of "walking", the "double killing of stocks and bonds" that appeared in the second quarter and the rapid rise in commodities represented by rebar since April are also in line with the typical characteristics of rotation of major asset classes during the stagflation period.
Therefore, regarding the debate on whether we are in the stagflation period, the author believes that whether it is from the perspective of "calling" (economic + inflation) or "walking" (performance of major assets), the stagflation period has passed the "duck law" test.
has entered a stagflation period, and "stagnation" has led to fear of investment demand, and "rise" will aggravate people's concerns about future expectations. With the mutual support of the two, the gradually high inflation will become the main line of asset allocation, and at the same time, the cyclical support behind CPI's "snail running wildly".
Microdeconstruction: 8 law , pour "oil" on fire
deconstructs CPI from a microscopic perspective. We found that CPI food projects account for less than 20%, and more than 80% are composed of non-food projects, among which the residential items are the single item with the largest weight among non-food items, accounting for 20%.
But contrary to the data, the food CPI, which only accounts for less than 20% of the weight of CPI, has become the key to the CPI's "rain" in recent years: in 2010, almost every abnormal CPI has been related to the large fluctuations in food CPI, and this round of abnormal CPI has also been directly related to the rise in vegetable prices caused by the Shouguang flood and the soaring pork prices caused by the African swine fever epidemic.
, which accounts for more than 80% of the CPI, has been "calm as water" for a long time, and is almost double passivated in statistical and economic sense, and has also become the main reason for CPI's long-term "crawling on the ground" - for CPI, the "28 Law" means that food items determine seasonal fluctuations, while non-food items determine long-term direction.
In addition to the endogenous reasons of its own food/non-food items, the trend of CPI also depends on the transfer of upstream industrial product prices (PPI) to the mid-downstream costs, which is called "the transmission of PPI to CPI." Since the supply-side reform was launched at the end of 2015, under the background of "three cuts, one reduction and one supplement", upstream profits have improved significantly and PPI has risen rapidly, which should have effectively transmitted CPI and driven CPI to rise.
But in nearly three years, CPI's "indifferent" has long exceeded the transmission period from the first half of the year to one year. Therefore, whether the transmission mechanism of PPI to CPI has failed has sparked widespread discussion. The author believes that CPI does not run wildly with PPI, but is more caused by internalization caused by the "28 Law", and should not be "taken by the upstream PPI transmission mechanism."
Since 2016, the upward slopes of PPI, non-food CPI and core CPI that excludes food and energy have almost been consistent, which shows that the conduction mechanism between each other has not disappeared; however, coincidentally, in mid-2016, the food CPI suddenly fell sharply independently, which largely offset the upstream transmission from PPI, and the result showed that CPI "has thousands of troops in mind but is calm."
The downward trend of food CPI is directly affected by the volatile pork prices: the cyclical decline of pork prices from 2016 to early 2018 directly led to the divergence of food CPI and non-food CPI and PPI trends; the stabilization and upward trends of pork prices since the second quarter of this year, coupled with the supply-side impact caused by the swine fever epidemic, made pork prices even more powerful. Food items and non-food items have changed from divergence to resonance, and CPI has gone from "crawling on the ground" to "running wildly".
In addition to endogenous inflation and upstream transmission, imported inflation cannot be ignored: under the intricate geopolitical situation, international oil prices have risen rapidly this year, and Brent 80 USD seems to be far from the end; at the same time, China's crude oil imports have been rising steadily, with a total import of 299 million tons of crude oil in the first eight months, an increase of 6.5% year-on-year - under the background of "both volume and price increase" of imported inflation, the pressure of CPI heating is quietly increasing.
Supply and demand power: look at supply in the short term, look at demand in the long term
So under the "28th law", CPI can be fully explained by only food CPI or pork prices? The author believes that otherwise: in the short term, the "20% impact" from the food items and the supply side is more seasonal factors, "it comes quickly and goes quickly", and will eventually be ironed by time; in the long run, the "80% weight" from the non-food items and the demand side is the core driving force that determines whether the snail can continue to run.
Why can mere pork control the historical process of the Dignified CPI? Just because "there is no demand in the mountains, supply is the king" - too weak demand has long left the "control" of CPI behind the supply: social consumer goods retail, as the core indicator for measuring consumer demand, determines the long-term trend of CPI from the demand side; its inertia decline since 2010 not only brings CPI into the "1 era", but also reflects the continuous slowdown in consumption expansion.
Segmentation, the growth rate of per capita disposable income of urban residents has been slowing down, making Chinese consumers more inclined to save surpluses rather than pre-spend consumption, and their overall consumption enthusiasm has been suppressed for a long time.
As a typical representative of optional consumption, the growth rate of automobile retail sales has almost fallen simultaneously with social retail. With the economic expectation of even turning negative growth this year - "tightening the belt", optional consumption is even more stretched.
Therefore, if the demand side cannot show significant improvement, the CPI "running" caused by the supply side may be just another "snatch foul". The author believes that under the current economic expectations during the stagflation period, the effectiveness of stimulating total demand can be examined from the perspective of monetary and fiscal:
From the perspective of monetary, from the central bank's monetary easing expectations of "lowering leverage" to "stabilizing leverage", social financing has recently shown signs of a stable rebound. If M2 can further keep up, the growth rate of social retail will be possible to stop falling and rebound with the improvement of liquidity, and drive the bottoming out and rebound of optional consumption and CPI; in addition, the increase in consumer monthly balance brought about by the reform of the personal income tax law will also become a major policy increase to stimulate social retail.
From the perspective of fiscal policy, combined with the recent statements of various ministries and commissions, the positive fiscal policy will take the lead in making a difference in infrastructure . Judging from historical experience, infrastructure behavior measured by the completion amount of fixed asset investment is highly countercyclical, that is, infrastructure activity is often ahead of the bottoming out of PPI and CPI.
The author believes that since the current infrastructure growth rate has no signs of rebound, it is unlikely that CPI will start to continue to rise; but it is worth noting that the infrastructure growth rate has approached a 20-year low, and the rebound in the future is expected. Once a new round of activity starts, CPI's "snail running" will become a "snail running" with more endurance.
Finally, whether the non-food indicators, which account for 80% of the pig price, can fully reflect the real cost increase of the "three mountains" of residence, medical care and education, is also worth further consideration. In the context of consumption grading, whether CPI, which has been disconnected from intuitive feelings and is related to excessive food prices, can launch refined grading indicators that are more in line with the needs of the times, should also become another perspective for us to pay attention to CPI.
7 In July, the author took the lead in pointing out that we have entered a stagflation period since the second quarter of this year. Under the stagflation period, economic growth slowed down and inflationary pressure increased. Major asset allocation should be "cash as king", commodities still have potential, and stocks and bonds need to be temporarily avoided.
This article is from Chunshi Capital
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