The latest CPI released by the National Bureau of Statistics in May rose by only 0.2% year-on-year, and the growth rate was below 1% for three consecutive months. The core CPI, which can better reflect the current overall price level, excluding food and energy prices, rose by 0.6% year-on-year, and the growth rate dropped by 0.1 percentage point from last month.
Yi Gang, governor of the People’s Bank of China, said that the GDP growth rate in the second quarter is expected to be relatively high (mainly in cardinal utility), and the CPI is expected to gradually pick up in the second half of the year, and the CPI growth rate will be above 1% in December. "We are confident, capable and qualified to achieve the expected growth targets set by the two sessions this year."
According to institutional analysis, the current price situation in China is generally weak, with the characteristics of "quasi-deflation", mainly due to factors such as the continuous downward pressure of external inflation, the weak cyclical performance of food prices, and the differentiation of consumer goods and services in the core CPI. Behind it is that while the market supply is sufficient, the overall recovery of consumption is relatively moderate, which also means that there are conditions for increasing the policy of promoting consumption.
Recently, the policy of promoting heavy consumption has been released one after another. The Ministry of Commerce, the Ministry of Industry and Information Technology, the National Development and Reform Commission and other departments issued the Notice on Doing a Good Job in Promoting the Consumption of Green Smart Household Appliances in 2023 and the Notice on Organizing the Activities of Promoting Consumption by Cars, taking the bulk consumption of automobiles and household appliances as the starting point to further tap the consumption potential. All localities also seize the business opportunities in the summer consumption season, impress consumers with innovative means and high-quality services, and continue to stimulate consumption vitality.
Core CPI remains at a low level.
According to the data released by the National Bureau of Statistics on June 9, the national consumer price (CPI) rose by 0.2% year-on-year in May, up by 0.1 percentage point from the previous month.
From the ring comparison, CPI decreased by 0.2%, with a decrease of 0.1 percentage point higher than that of last month. Among them, due to seasonal factors, food prices fell by 0.7%, which was 0.3 percentage points narrower than that of last month, affecting CPI by about 0.12 percentage points. In non-food products, travel demand dropped after holidays, and the prices of air tickets and vehicle rental fees both dropped by 7.2%.
Yi Gang said that in recent months, CPI and PPI decreased month-on-month, which was mainly affected by two factors. First, there is a time difference between supply and demand recovery. With the strong support of the package policy of stabilizing the economy, domestic production continued to accelerate recovery, agricultural and sideline products production was stable, logistics channels were smooth, and residents’ "vegetable baskets" and "rice bags" were adequately supplied. At the same time, the demand for bulk consumption such as automobiles and home improvement is weak. Second, cardinal utility is obvious. Last year, the international oil price once approached the $140/barrel mark, and this year it has fallen back to around $80/barrel, driving the year-on-year price increase in China down; In March last year, the price of fresh vegetables rose out of season due to the disturbance of epidemic situation, which also had a high base this year.
Wang Qing, chief macro analyst of Oriental Jincheng, told CBN that the year-on-year decline in vegetable prices in May was significantly narrowed due to the lower base in the same period of last year, which led to the expansion of the year-on-year increase in food prices, which was the main reason for pushing up the CPI in May. In terms of non-food, despite the downward adjustment of domestic refined oil prices, the price base was higher than that of the same period of last year, and the year-on-year decline of gasoline prices in May was further expanded. However, the overall service price level rose, and the impact of automobile "price war" gradually weakened, and the year-on-year increase of non-food prices remained basically stable.
According to estimates, in the 0.2% year-on-year increase of CPI in May, the hike effect of price changes last year was about 0.5 percentage points, compared with 0.3 percentage points last month; The impact of the new price increase is about -0.3 percentage points, compared with -0.2 percentage points last month. The core CPI excluding food and energy prices rose by 0.6% year-on-year, and the growth rate dropped by 0.1 percentage point from last month.
Wu Chaoming, vice president of Caixin Research Institute, told CBN that the core CPI remained in the low range below 1%, which was a direct reflection of insufficient domestic demand, reflecting that the recovery of income and consumer demand in the residential sector was still slow. Looking back, with the domestic epidemic basically over, the further liberalization of future consumption scenarios will boost the recovery of service industry demand. The stabilization and recovery of core CPI is a high probability event, but the recovery of residents’ consumer demand still faces twists and turns and uncertainties. It is expected that the short-term core CPI recovery slope will be slow.
Regarding the next price trend, Wang Qing thinks that considering the trend of high-frequency price data since June and the change of price base in the same period of last year, the year-on-year increase of CPI in June may rebound slightly to around 0.4%, but it will still be in a state of low inflation below 1.0%. This means that in the short term, both fiscal policy and monetary policy have a large space to promote consumption, including the appropriate distribution of consumer vouchers and subsidies, as well as increasing financial support for new consumption and service consumption.
"But fundamentally speaking, it is still necessary to maintain the momentum of rapid economic recovery, promote the continuous improvement of the employment situation, and increase residents’ income through various channels. In addition, the policy should focus on guiding the real estate industry to achieve a soft landing as soon as possible. This can not only directly promote housing-related consumption, but also directly enhance residents’ consumer confidence. " Wang Qing said.
Policies to promote consumption have successively landed.
Since the second quarter, after the centralized release of the backlog demand, insufficient demand has become the core issue, and the pace of economic recovery in China has slowed down. Faced with this situation, the macro-policy level needs to make timely efforts to avoid the interruption of the recovery momentum.
Shen Jianguang, chief economist of JD.COM Group, said that with the end of spontaneous recovery after the epidemic and insufficient new demand, China’s economic recovery momentum has obviously weakened, and the prospect of economic growth still remains uncertain. In this context, the policy level needs to further expand domestic demand, and fiscal policy, especially the central government, will be an important starting point. For example, giving cash subsidies or coupons to low-and middle-income groups, reducing social security and provident fund rates for industries with strong employability, and increasing residents’ disposable income in the current period; At the same time, it is supplemented by promoting green smart home appliances to the countryside and replacing old ones with new ones, and issuing purchase vouchers to small and medium-sized enterprises to promote consumption to return to the right track as soon as possible.
Recently, policy documents on promoting consumption have been released one after another. On June 8, the Ministry of Commerce announced that it plans to co-ordinate the "100-city linkage" automobile festival and the "thousand counties and thousands of towns" new energy automobile consumption season from June to December 2023. In view of the urban market, the Ministry of Commerce plans to select about 100 cities, focusing on new car sales, used car trading, scrapping and updating, trade-in of old cars for new ones (new energy vehicles), automobile aftermarket and other contents, and arrange automobile exhibition activities. In addition, the Ministry of Commerce plans to coordinate and promote local and enterprises to introduce targeted policies and measures to support automobile consumption, give full play to the role of local financial funds, and encourage financial institutions to introduce financial support measures for automobile credit.
In view of the county and township markets, the Ministry of Commerce will organize the launching ceremony of the "Thousands of Counties and Towns" new energy vehicle consumption season, and guide all localities to carry out the "caravan" of new energy vehicles into rural areas and other new energy vehicles to promote consumption. In addition, according to the characteristics of rural areas, the Ministry of Commerce encourages enterprises to promote new energy-loaded micro-planes, micro-trucks and light trucks with high cost performance and strong practicability to the countryside, and at the same time promote the after-sales maintenance service network of new energy vehicles to sink to rural areas and promote the improvement of rural charging infrastructure.
According to China Association of Automobile Manufacturers, the downward pressure on China’s economy continues to increase, the economic operation mainly shows a recovery improvement, the demand is still insufficient, the operating pressure of enterprises is generally too high, and the task of stabilizing the growth of the automobile industry is still heavy due to the complicated and changeable international situation. Effective policies to stabilize and expand automobile consumption need to be continuously boosted to fully promote the release of automobile consumption potential and the stable operation of the automobile industry.
Previously, the National Development and Reform Commission and the National Energy Administration issued the "Implementation Opinions on Accelerating the Construction of Charging Infrastructure to Better Support New Energy Vehicles to the Countryside and Rural Revitalization", and made specific arrangements for moderately advancing the construction of charging infrastructure and optimizing the purchase and use environment of new energy vehicles.
Cui Dongshu, secretary-general of the Federation, said that one of the major differences between the new energy vehicle market and the traditional fuel vehicle market is that the popularity of pure electric vehicles in small cities, counties and townships is still relatively low, while the popularity of traditional fuel vehicles in rural markets is relatively strong, so in the county and township markets, new energy vehicles have huge room for development.
The the State Council executive meeting held on June 2 pointed out that it is necessary to continue and optimize the vehicle purchase tax reduction and exemption policy for new energy vehicles, build a high-quality charging infrastructure system, further stabilize market expectations, optimize the consumption environment, and release the consumption potential of new energy vehicles.
Cui Dongshu said that the new measures are expected to bring great impetus to the development of new energy automobile industry in the next few years. Subsidy recession has a great impact on the new energy automobile industry, and consumers are sensitive to price and taxation. Continuing and optimizing the vehicle purchase tax reduction and exemption policy for new energy vehicles will further release the consumption potential of new energy vehicles and promote the sustainable and steady growth of the new energy automobile industry.
In addition to cars, home appliances are also an important starting point for promoting consumption. Four departments, including the General Office of the Ministry of Commerce, the General Office of the National Development and Reform Commission, the General Office of the Ministry of Industry and Information Technology, and the General Office of the General Administration of Market Supervision, recently jointly issued the Notice on Doing a Good Job in Promoting the Consumption of Green Smart Household Appliances in 2023 (hereinafter referred to as the Notice), which clearly stated that it is necessary to carry out in-depth trade-in of household appliances and promote the consumption of green smart household appliances.
The "Notice" proposes to promote green smart home appliances to the countryside. Support home appliance manufacturers to accelerate the development and promotion of green smart home appliances such as water heaters, range hoods and microwave ovens with high cost performance, simple operation and excellent quality according to the characteristics of rural market and consumer demand.
In terms of organizing activities, the Notice requires that, in combination with the design of various consumption scenarios of the "2023 Consumption Boosting Year" of the Ministry of Commerce, online and offline consumption channels should be coordinated, and activities such as home appliance festivals, shopping festivals and online shopping festivals should be organized to create a strong atmosphere for green smart home appliances consumption. Comply with the development trend of digital home, and explore the integrated consumption of household appliances and homes.
According to industry analysis, after the last round of home appliances going to the countryside policy, rural home appliances have basically reached the renewal period. Vigorously promoting green smart home appliances conforms to the general trend of consumption upgrading and industrial development, which is not only conducive to further improving the quality of life of residents, but also stimulating the economy and promoting sustainable development.
Wang Yiming, vice chairman of China Center for International Economic Exchanges, said at the "Monthly Talk on Economy" held by China Center for International Economic Exchanges a few days ago that expanding consumption is more important and urgent for the overall improvement of economic operation. We should give priority to restoring and expanding consumption to expand domestic demand, effectively improve market expectations, enhance the pertinence of policies, remove institutional obstacles restricting consumption growth through reform and innovation, stimulate potential consumer demand, and give play to China’s super-large-scale market advantages, thus promoting China’s economy to continue to improve and opening a new round of growth cycle.