Macroeconomic Downturn Week: Shrinking Demand Is A Normal Phenomenon.

In November 27th, the latest economic data released by the Statistics Bureau showed that the total profit of Industrial Enterprises above Designated Size dropped by 4.6% over the same period last year, a decrease of 4.5 percentage points over that of September, and a decrease of 2% in the 1-10 months of October, a decrease of 0.3 percentage points over that of 1-9 months.

China's economic data have failed to stabilize after entering the four quarter, and the pressure of economic downturn is still evident.

The economic cycle consists of four stages: prosperity, recession, depression and recovery.

The fluctuation of totality and overall situation is inevitable.

Commodities, which are closely related to the economic cycle, are facing the dilemma of declining demand and shrinking.

At this point, if there is no corresponding contraction in the supply level of commodities, there will be a lot of surplus, resulting in a fall in prices.

At present, we see that various industries have begun to call for a reduction in production and a plan to reduce production. This is moving in the right way, and we should pay attention to the progress of production capacity at the end of supply.

Rational attention is given to the amount of reduction in production, whether the amount of production reduction is greater than the demand reduction, and the extent of reduction can be changed.

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At the eleventh meeting of the central financial and economic leading group, held in November 10th, general secretary Xi Jinping put forward the concept of "supply side structural reform": "in the moderate expansion of aggregate demand, efforts should be made to strengthen the structural reform of the supply side, and strive to improve the quality and efficiency of the supply system, and enhance the driving force for sustained economic growth."

We see the failure of the current Keynes theory and the dilemma of monetary policy. Monetary easing can not stimulate the demand of traditional industries. What the market needs is the supply side reform, and we must completely stock up to capacity, so that the supply level can adapt to the declining demand.

Therefore, part of the purchase and storage can not solve the surplus situation.

Goals.

In addition, the reduction of production is not achieved overnight or only in the "appeal". To completely reduce production capacity and inventory is the goal of production reduction.

In the last week of November, there were some unusual and unreasonable rumors on the market, which made the futures market in a mess.

Short lots of liquidation, aluminum and coking coal opened and hit the limit, the nickel plate rose 8% (second stop boards 9%), lead, zinc and tin multi contract hit the limit.

But then, with the further digestion of the news and the rational return of market sentiment, the price of most varieties dropped.

We believe that the use of industry to seek support time, spread all kinds of unconfirmed news triggered stampede, disrupted the normal operation of the market, and to both sides of the larger unanticipated losses.

A complete economic cycle consists of four stages: prosperity, recession, depression and resuscitation. It is not a vicious "recession" or "malicious" recession, nor a "malicious" short price and a "malicious" downturn.

These abnormal and unreasonable voices cause short-term agitation to the market, but they can not change the trend of commodity prices under the macroeconomic downward cycle.