(Picture source: Panoramic Vision)
Economic Observer Reporter Hu Qun
htmlOn December 9, Zhou Xiaochuan, Governor of the People's Bank of China, Yi Gang, Vice President, and Pan Gongsheng, Director of the State Administration of Foreign Exchange, attended the press conference of the News Center of the First Session of the 13th National People's Congress. Zhou Xiaochuan and Yi Gang talked about the "GDP deflating index" respectively. As non-economicians, they may be a little unfamiliar with this word: "GDP" is a very common word, but "GDP deflating index" is relatively rare.At the press conference, Yi Gang said , "We monitored that the loan interest rate rose by 0.4 percentage points year-on-year at the end of last year. Look at the price of last year, the CPI of last year was 1.6, PPI was 6.3, and the deflating index of GDP is probably the weighted average of CPI and PPI."
Zhou Xiaochuan mentioned the GDP deflating index in response to the M2 indicator problem, the original text is "Because the M2 indicator caliber is always changing, mainly because the financial market structure and financial products are constantly changing, M2 is not a very accurate measurement of monetary policy looseness. But since this question has been asked, what do we think is that the caliber of M2 does not change much in the short term? If the growth rate of M2 and nominal GDP is basically the same, from the perspective of broad money supply , it is not loose or tight. Nominal GDP is what we are talking about now, plus GDP deflating index, that is, GDP adjusted by price. "
GDP is a measure of the total expenditure used for goods and services in all markets in the economy. Nominal GDP and actual GDP are the market value of final goods and services. Nominal GDP is the production of goods and services evaluated at current prices; while actual GDP is the production of goods and services evaluated at constant price .
GDP deflating index only reflects the prices of goods and services, and is used to measure how much the prices of goods and services produced in a country have increased compared to the base year. The specific calculation is to multiply the ratio of nominal GDP to real GDP in the same year by 100.
GDP deflator index can well reflect inflation. The inflation rates in two consecutive years can be calculated using the following method:
Inflation rate in the second year = (GDP deflator index in the second year - GDP deflator index in the first year)/GDP deflator index in the first year X100%.
Economists usually use the GDP deflator to monitor the average price level in the economy, thereby monitoring inflation. Most ordinary people don’t know about the GDP deflating index and its use as a tool to measure price movement, but they are more familiar with the consumer price index , that is, CPI.
The key difference between the two is the purchase of the goods basket. The GDP deflator reflects the price of all items and services produced in China, while the CPI reflects all items and services purchased by consumers. The basket of
GDP deflating index includes products that families do not purchase, such as buses, subways, power plants, etc., and this basket only includes domestically produced items, not imported goods, such as mobile phones and clothing produced abroad. In addition, even if the same product is in the basket of GDP deflating index and in the basket of CPI, the weight may be different. For example, although the expenditures related to residence (including rent, water, electricity, home decoration, etc.) are all in the two baskets, they have a higher weight in the CPI composition.
In addition, the expenditure on buying a house is not included in the CPI. In the calculation method of GDP, buying a house is included in investment, not consumption.
Although both measure inflation, they are sometimes not completely consistent, but in most cases, the difference between the two is very small.
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