June Industrial And Agricultural Products Price Differentiation Monetary Policy Loose Space

In July 10th, the National Bureau of statistics issued the national consumer price index (CPI) and producer price index (PPI) data for 2019 June. In June, CPI rose 2.7% compared with last month, while PPI rose 0.6% from a month ago. Analysts pointed out that the current core factor affecting the trend of CPI is that food prices have little room for further growth in the future, and there is room for further decline in the prices of industrial products. Under the circumstances that the global central bank monetary policy tends to be more relaxed, there is room for further easing of monetary policy in China. 　　

　　 CPI hardly affects monetary policy in the short term

Food is still the main factor affecting the current trend of CPI. In June, food prices rose by 8.3% over the same period last year, affecting CPI's rise of about 1.58 percentage points. In the category of food prices, fresh fruit prices are the main factors that affect CPI's year-on-year rise. In June, the prices of watermelons and peaches dropped, and prices of apples and pears continued to rise and higher. In addition, the prices of Southern fruits, such as pitaya and pineapple, rose as well. The price of fresh fruit in the whole country increased by 5.1% over the same period last year, which affected CPI's rise by about 0.11 percentage points. At present, the price level of fruit is at a historical high. 　　

Tang Liming, an analyst with Dongxing securities, said that the impact of food prices on the trend of CPI is rising. According to Tang Liming analysis, the rise in food prices and the proportion of food consumption expenditure in household income expenditure will become a trend. The increase in the cost of rent, logistics and labor will also boost food prices. 　　

"Although the CPI rose by nearly 3% in June, the increase in CPI was mainly affected by the price of food. Taking into account the fact that the proportion of food expenditure in the expenditure structure of residents' disposable income is not high, CPI is more difficult to affect the real disposable income of residents, and the trend of CPI is more difficult to become a major factor affecting monetary policy in the short term." Tang Liming said. 　　

　　 There is room for cutting interest rates. 　

In addition, it is worth noting that this year, prices of vegetables, pork and fruits have risen in turn, while the prices of industrial products have continued to fall and the price trend has been separated. From the year-on-year perspective, PPI rose from 0.6% in May to flat, and industrial products with lower prices were coal, oil and ferrous metals. 　　

Chen Yanli, an analyst with Shanghai securities, said that vegetable prices were mainly affected by the weather, and the price dropped naturally after the reduction of extreme weather. Pork and fruit are all rising prices due to the shortage of supply side, which is difficult to form trend inflation. After a large number of fruits are listed in summer, supply will ease down and prices are expected to fall. Although the supply of pork is tight, the pattern is difficult to change in the short term. But as long as demand is weak, there is no room for prices to continue to rise. Generally, the price trend of CPI is less cyclical, so the price pressure is mainly reflected in the price of industrial products. Under the influence of cardinal effect and seasonal changes in food prices, the next CPI will go down, and PPI will linger on the zero baseline. This will provide room for future rate cuts. 　　

Tang Liming believes that at present, China's macroeconomic environment presents a more complex situation. At present, China's physical enterprises are also facing a downward pressure to a certain extent. If the US Federal Reserve takes the interest rate cut trend and under the circumstances of monetary easing in the global central bank, China's monetary policy may have room for further easing. For small and micro enterprises, high-tech manufacturing, new service industries, etc., there are policy space for targeted reduction and preferential interest rates.