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text: ren zeping team

in august, cpi rose by 0.6% year-on-year, compared with an increase of 0.5% in the previous month; ppi fell by 1.8% year-on-year, compared with a decrease of 0.8% in the previous month.

1. deflation continues to worsen. it is time to focus on the economy and launch a large-scale economic stimulus plan.

ppi has been declining for more than 20 consecutive months, cpi has been hovering around 0, private enterprise profits have continued to show negative growth, and signs of deflation are becoming increasingly obvious.

yi gang said at the shanghai bund financial summit that china should now focus on resisting deflationary pressure.china should now focus on resisting deflationary pressures, broad price measures have been negative for several consecutive quarters, and china's current focus should be on getting the gdp deflator to turn positive in the next few quarters. china's economy is still recovering, but relatively slowly. it is hoped that china's producer price index will be around zero by the end of this year. active fiscal policy and prudent monetary policy are needed to support growth. "

8the monthly price data reflects four major characteristics: first, the overall price situation remains sluggish.although the cpi rose slightly by 0.1 percentage point to 0.6%, it was mainly due to the increase in food prices caused by abnormal weather and is unlikely to be sustainable;second, domestic demand is insufficient.the core cpi was 0.3% year-on-year, down 0.1 percentage point from the previous month, and fell from 0.3% to -0.2% month-on-month;third, the decline in ppi widened again.-1.8% year-on-year, which has been negative growth for 23 months;fourth, the real interest rate remains high.although my country's nominal interest rate continues to decline, the real interest rate after deducting inflation is at a high level. the real interest rate is relatively high globally, which is unfavorable for consumption and investment.

prices measure the temperature of the economy, and long-term low prices are a "chronic disease" of the economy.behind the sluggish prices are weak consumption, unclear employment and income situation, deteriorating corporate profits, shrinking wealth and deleveraging of residents, and a decline in vitality and confidence in society as a whole.

japan is a typical example of a country that is deeply trapped in "chronic deflation".since the banking crisis in 1997, society has formed low inflation expectations. consumers have to endure wage freezes without changing prices, and companies have to endure price freezes without raising wages. social vitality is insufficient and the economy has difficulty growing, thus forming a vicious cycle.

the current low prices are due to insufficient effective demand. the main contradiction of the economy is internal, facing challenges such as "liquidity trap", "balance sheet recession" and "debt-deflation" cycle.the momentum of the three major drivers has slowed down, and consumption has fallen sharply since the second quarter.

the current priority is to work hard on the economy, increase effective demand, boost confidence, respect the rules, be receptive to good advice, and respond to the voice of society. from an economic perspective, the simplest and most effective way to boost confidence is a "new" round of economic stimulus, that is, through fiscal expansion, combined with monetary easing, to expand demand, drive employment, boost economic growth, and boost the confidence of residents and businesses.the results are immediate and have been proven effective both in ancient and modern times, both in china and abroad.

it is recommended to launch a large-scale economic stimulus plan led by new infrastructure.in the short term, we will expand demand and in the long term, we will create a new engine for china's economy. at the same time, we will reduce taxes and fees to reduce the burden on enterprises and residents, so that they can recuperate and strengthen their foundation.

in terms of monetary policy, it is necessary and feasible to reduce the interest rates of existing mortgage loans and lower interest rates and reserve requirements.: first, since mid-august, the rmb has continued to appreciate, and the constraints of stabilizing the exchange rate on my country's monetary policy are weakening; second, the issuance of policy bonds accelerated in august and september, and the amount of mlf maturing increased, so there is a need to supplement liquidity; third, major countries such as switzerland, sweden, canada, the bank of england, and the european central bank have already cut interest rates, and the us non-farm data in august was lower than expected, and expectations of recession have increased. the probability of a rate cut in september is high, sending a positive signal. recently, the director of the monetary policy department of the central bank said that the average statutory reserve ratio of financial institutions is currently about 7%, and there is still room for improvement.

"hemingway's law of motion tells us that in the process of development and change, certain things often undergo a gradual, slow change first, and then a sudden, drastic change or breakthrough ("gradually, then suddenly."). we should attach great importance to the current situation of insufficient demand and low prices, and think carefully about the present and the future.if we can respond to the call of society, launch a large-scale economic stimulus plan, and strengthen the protection of the private economy, our economy will have great hope.confidence is more important than gold。

2  8monthly price data show the following characteristics:

1) cpi rose, with food prices being the main contributing factor; in fact, the core cpi showed negative growth on a month-on-month basis, and deflationary pressure increased.excluding food and energy pricescore cpi fell from 0.3% to -0.2% month-on-month; 0.3% year-on-year, down 0.1 percentage point from the previous month. cpi was 0.6% year-on-year, up 0.1 percentage point from the previous month; 0.4% month-on-month, down 0.1 percentage point from the previous month.

2) food prices rose significantly, mainly due to high temperatures and local heavy rainfall pushing up vegetable and fruit prices and a slight increase in pork prices.in august, the food price increased by 3.4% month-on-month, up 2.2 percentage points from the previous month; the food price increased from 0 to 2.8% year-on-year. in august, the prices of fresh vegetables, pork, aquatic products, eggs, and fresh fruits increased by 18.1%, 7.3%, 0.2%, 2.8%, and 3.8% month-on-month, up 8.8, 5.3, -0.2, -0.9, and 4.1 percentage points from the previous month.

3) non-food prices turned negative on a month-on-month basis, with the decline in international crude oil prices and travel demand being the main reasons; durable goods prices continued to fall; affected by real estate, rental prices trended downward.in august, non-food prices dropped from 0.4% to -0.3% month-on-month. household appliances, transportation tools and communication tools dropped by -0.7%, -0.3% and -0.8% month-on-month, respectively, down by -1.1, 0.3 and -0.7 percentage points from the previous month; the price of transportation fuel dropped by -2.9% month-on-month. rental housing prices dropped by -0.3% year-on-year.

4) pig pricethe month-on-month increase expandedthe "pig cycle" has entered an upward phase, and there is not much room for this round of growth.in august, the pork price increased by 16.1% year-on-year, down 4.3 percentage points from the previous month; and increased by 7.3% month-on-month, up 5.3 percentage points from the previous month. as of september 6, 2024, the average wholesale price of pork was 27.36 yuan/kg. after the production capacity and inventory approached the balance point, they fluctuated. the current destocking speed slowed down, and the pig-to-grain ratio increased; the industry concentration increased, and the price fluctuations in the new pig cycle may be smaller than those in the traditional pig cycle.

5) the year-on-year and month-on-month declines of ppi widened, mainly due to insufficient demand for industrial products and falling commodity prices;prices in the industrial chain such as crude oil, steel, coal, and non-ferrous metals generally fell, prices in the consumer goods manufacturing industry fell, and prices in the high-tech industry rose and fell differently.in august, ppi fell by 1.8% year-on-year, 1.0 percentage point wider than the previous month; ppi was -0.7% month-on-month, 0.5 percentage point wider than the previous month. aircraft manufacturing prices rose by 2.1%, industrial robot manufacturing prices rose by 0.8%, and computer manufacturing prices rose by 0.4%;the computer, communications and other electronic equipment manufacturing and automobile manufacturing industries both declined by 0.2% month-on-month.

8the cpi rose in may, mainly due to the special weather conditions that pushed up food prices. pork prices continued to rise; durable goods prices continued to fall; housing prices trended downward.the cpi was 0.6% year-on-year, up 0.1 percentage point from the previous month; the month-on-month cpi was 0.4%, down 0.1 percentage point from the previous month.the core cpi, excluding food and energy prices, fell from 0.3% to -0.2% month-on-month; year-on-year, it was 0.3%, down 0.1 percentage point from the previous month.in the year-on-year change of cpi in august, the lag effect was approximately -0.3 and the new price increase factor was approximately 0.9.

food prices rose significantly, mainly due to the high temperatures in summer, heavy rainfall in many places, and a slight increase in pork prices.in august, the food price increased by 3.4% month-on-month, up 2.2 percentage points from the previous month; the food price increased from 0 to 2.8% year-on-year. in august, the prices of fresh vegetables, pork, aquatic products, eggs, and fresh fruits increased by 18.1%, 7.3%, 0.2%, 2.8%, and 3.8% month-on-month, up 8.8%, 5.3%, -0.2%, -0.9%, and 4.1 percentage points from the previous month.

non-food prices turned negative on a month-on-month basis, with the decline in international crude oil prices and travel demand being the main reasons; durable goods prices continued to fall.in august, the month-on-month growth rate of non-food items decreased from 0.4% to -0.3%; the year-on-year growth rate of non-food items was 0.2%, a decrease of 0.5 percentage points from the previous month.

among the seven major categories, prices of five categories fell, and prices of housing and healthcare were 0 month-on-month.the month-on-month changes in clothing, housing, transportation and communications, education, culture and entertainment, medical care, daily necessities and services, and other goods and services were -0.2%, 0, -1.1%, -0.1%, 0, -0.7%, and -0.6%, respectively, up 0.2, 0, -2.0, -1.4, 0, -1.1, and -1.5 percentage points from the previous month.

from the perspective of subdivision，1) as the school term approaches, the decline in demand for travel and entertainment drives down service prices.service prices fell by -0.1% month-on-month, down 0.7 percentage points from the previous month; air ticket and tourism prices fell seasonally by 5.1% and 0.7% respectively.2) falling oil prices have led to lower prices for transportation fuel.in august, the price of transportation fuel was -2.9% month-on-month, down 4.4 percentage points from the previous month.3) prices of durable consumer goods continued to fall.household appliances, transportation tools and communication tools were -0.7%, -0.3% and -0.8% month-on-month, respectively, a change of -1.1, 0.3 and -0.7 percentage points from the previous month.4) rental prices continue to decline under the influence of real estatein august, rental prices fell by -0.3% year-on-year.

4 pig cycle: the upward cycle is ongoing, but there is not much room for this round of growth

8the monthly pork price fell year-on-year, but the month-on-month increase widened.in august, the pork price increased by 16.1% year-on-year, down 4.3 percentage points from the previous month; and increased by 7.3% month-on-month, up 5.3 percentage points from the previous month. as of september 6, 2024, the average wholesale price of pork was 27.36 yuan/kg.

we believe that the "pig cycle" has entered an upward phase and there is not much room for this round of growth.

first, after 13 months of destocking, the intensity of capacity reduction has weakened for four consecutive months.according to historical rules, the continuous reduction of production capacity for about 10 months will be transmitted to the pig price. the number of sows in stock reflects the pig production capacity. in march 2023, the number of sows in stock increased by 2.9% year-on-year, in march 2024, the number of sows in stock decreased by 7.3% year-on-year, and in july, the number of sows in stock decreased by 5.4% year-on-year.

second, the production capacity stock fluctuates after approaching the equilibrium point.the current breeding sow inventory is 40.41 million, while the normal inventory is 39 million, which is still slightly higher than the normal inventory. the current destocking speed has slowed down, and it is expected to fluctuate around the balance point or slowly decline.

from the historical pig cycle, the two pig cycles that started in 2014 and 2018 both experienced 2-3 quarters of rapid capacity decline before prices started to rise sharply. among them, the year-on-year decline in sow capacity has remained above -20% for many consecutive months. the rapid reduction of capacity has also created room for pig prices to rise.

third, the pig-to-feed ratio is rising.as of september 6, the pig-to-feed ratio has reached 8.43, accelerating upward since it first broke out of the excessive decline range (pig-to-feed ratio below 6) on march 15. according to historical data, after the pig-to-feed ratio breaks through 7, it is expected to see an upward trend in the pig cycle.

the industry concentration is increasing, and the price fluctuations in the new pig cycle may be smaller than those in the traditional pig cycle. many small-scale farms were eliminated in the 2018 african swine fever, which accelerated the process of increasing industry concentration.after the african swine fever in 2018, the proportion of pigs slaughtered by the 13 listed companies in the country doubled to 14.3% in 2021; the proportion of pigs slaughtered by farms with more than 500 heads increased from 36.6% in 2011 to 65% in 2022. the increase in industry concentration may bring about economies of scale, the production capacity of large-scale breeding institutions will continue to increase, and irrational "chasing up and selling down" behavior will decrease.

5  PPIthe year-on-year and month-on-month declines widened, mainly due to insufficient demand for industrial products and falling commodity prices.

PPIboth year-on-year and month-on-month growth declined, mainly due to insufficient demand for industrial products and falling commodity prices.in august, ppi fell by 1.8% year-on-year, 1.0 percentage point wider than the previous month; ppi was -0.7% month-on-month, 0.5 percentage point wider than the previous month. in the year-on-year change of ppi in august, the tail effect was about -0.1 percentage point, and the new impact of price changes this year was about -1.7 percentage points.

judging from the ex-factory prices of industrial producers, the prices of means of production continued to show negative growth month-on-monthin august, the prices of means of production and consumer goods were -1.0% and 0% month-on-month respectively, with a change of -0.7 and 0 percentage points from the previous month.

the prices of mining industry, raw materials and processing industry were -1.6%, -1.2% and -0.9% month-on-month, down 2.3, 1.0 and 0.5 percentage points from the previous month respectively; the prices of clothing were -0.1% month-on-month, down 0.2 percentage point from the previous month, and the prices of food, general daily necessities and durable consumer goods were all 0 month-on-month, down 0.2, -0.1 and -0.2 percentage points from the previous month respectively.

from the industry perspective, prices in the industrial chain such as crude oil, steel, coal, and non-ferrous metals have generally declined, prices in the consumer goods manufacturing industry have fallen, and prices in the high-tech industry have varied.

1) prices of crude oil, steel, coal, nonferrous metals and other industrial chains generally fell。in august, the growth rates of oil and natural gas extraction, oil, coal and other fuel processing, rubber and plastic products, non-metallic mineral products, chemical raw materials and chemical products manufacturing, and chemical fiber manufacturing were -4.3%, -2.0%, -0.3%, -0.7%, -0.9%, and -0.2% month-on-month, respectively, down 7.3, 2.5, 0.2, 0.1, 0.6, and 0.8 percentage points from the previous month.

coal mining and washing, ferrous metal mining and dressing, petroleum, coal and other fuel processing, ferrous metal smelting and rolling processing, non-ferrous metal smelting and rolling processing, and metal products were -1.2%, -2.0%, -2.0%, -4.4%, -2.3% and -0.6% month-on-month, respectively, down 1.2, 1.2, 2.5, 2.7, 1.9 and 0.5 percentage points from the previous month.

2) prices of consumer goods manufacturing continued to declinethe agricultural and sideline food processing industry and food manufacturing industry both decreased by 0.1% month-on-month, a change of 0.2 and 0 percentage points respectively from the previous month.

3）price fluctuations in high-tech industries varied.aircraft manufacturing prices rose by 2.1%, industrial robot manufacturing prices rose by 0.8%, and computer manufacturing prices rose by 0.4%;the computer, communications and other electronic equipment manufacturing and automobile manufacturing industries both declined by 0.2% month-on-month.

except for agricultural and sideline products, most purchasing prices fell.in august, the month-on-month changes in fuel and power, ferrous metals, non-ferrous metal materials, chemical raw materials, wood pulp, building materials, agricultural and sideline products, and textile raw materials were -0.5%, -1.9%, -1.7%, -0.8%, -0.3%, -0.5%, 0.7%, and -0.3%, respectively, up by -0.3, -1.3, -2.0, -0.6, 0.0, -0.4, 0.3, and -0.2 percentage points from the previous month.