On August 9, according to figures published by the Office of National Statistics, CPI in July rose 2.1% year-on-year, maintaining the upward trend in June, the increase reached a four-month high. On a month-on-month basis, CPI reverse the downward trend, ending four months of negative growth. The July PPI rose by 4.6% year-on-year. Both CPI and PPI in July exceeded than expectations.
From the structure of price increases, CPI rose by 2.1%, non-food prices rose by 2.4%, and CPI rose by about 1.96%. Among them, the prices of gasoline and diesel rose by 22.7% and 25.1% respectively, which together affected the CPI increase by about 0.42%. The PPI rose by 4.6%, the growth was a 0.1% down from the previous month; the oil and gas exploration industry, which expanded its amount of increase to 42.1%, and 9.4% up from the previous month. Among the rising factors of domestic CPI and PPI in July, also include the rise of oil price. It is worth noting that in the context of the rise in crude oil prices and the growing global trade friction, the CPI and PPI in July began to rise, which may lead to a trend of higher-than-expected inflation this year.
Zhang Jun, chief economist at Morgan Stanley Huaxin Securities, also expressed concern about the rise in inflation caused by oil prices, there was a sharp rise in crude oil prices over $100 in 2006 and 2010. A reasonable logical reasoning is that China's crude oil dependence is up to 70%, if crude oil prices jump, China's imported inflation may emerge once more and become an important promoter of inflation.
In July, China's price index has just risen, and the fear that inflation risk may come back is over-anxious worriers.
In the past decade of the financial crisis, despite central banks flood the markets with liquidity, creating a world with a prolonged low-interest rate, even negative interest rates and capital surfeit, it is surprising that global markets have not experienced inflation. For the phenomenon of low inflation under capital surplus and low interest rates, some economists exclaimed that "inflation is dead" and even began to consider whether the idea of economics about inflation needs to be rewritten.
Major central banks were confused by Low inflation, which has not only affected their monetary policy decisions and operational rhythms, but also caused academics to reflect on traditional economics. For example, former Federal Reserve Chairman Yellen once said:" We don't fully understand inflation... The shortfall of inflation this year is more of a mystery ".
So what is the cause of low inflation? Will low inflation persist for a long time? ANBOUND has analyzed long-term low inflation in the context of global capital surplus. The first explanation is globalization. The world is in a new stage of global industrial division brought about by globalization and global liquidity surplus brought about by urbanization, global excess liquidity has led to global overproduction. Boosting the money supply, it is also difficult to stimulate inflation.
Second, it is related to the development of Internet commerce. It is precise because of the "new economy" leader that specializes in the development of robots, automation, and artificial intelligence such as Amazon that wages cannot rise sharply. Similar to "Amazonization", China's retail market has also begun to appear "Alibabanazition". The e-commerce business has greatly reduced information asymmetry and reduced the intermediate links of business. Although it has "killed" many physical circulation enterprises, it has objectively lowered the price level.
Third, it is related to the transformation of developed countries entry into a consumer society. In the transition to a consumer society, both consumption content and consumption patterns will change. A common phenomenon is that the proportion of material consumption is decreasing, but services consumption is increasing—such as education, sports, culture, tourism, health, etc. It has become an increasingly important consumer content that costs money. Inflation indicators based on material consumer goods will naturally go down or stay low. In a consumer society, material consumption is very cheap, but the price of service will rise sharply. The liquidity released by the global easing policy will be fuelling asset bubbles (real estate, stock market, etc.), a considerable part of the money flow into the service consumption field.
The price index rose in July, which did reflect multiple signs of price increases. For example, Sino-US trade frictions bring tariff increases and crude oil prices rise leading to rising prices; RMB depreciation triggers imported inflation; many commodity prices have shown signs of rise, and in commodity futures markets, more and more commodity prices began to rise. However, these phenomena are not enough to assert that high inflation, which has a significant impact on consumers, will return.
Final Analysis Conclusion:
If China is still in the midst of a transition to a consumer society, then low inflation will continue. The rise in the domestic price index only represents a change in the short-term price factor, and it cannot be concluded that inflation will return.
