Kunpeng Project
Which is more terrible, inflation or deflation?Are we in deflation?
The National Bureau of Statistics released the CPI data for November 2023, and the national household consumption** decreased by 05%。Among them, the city fell by 04%, down 08%；Food** down 42%, non-food ***04%；Consumer goods** decreased by 14%, service ***10%。From January to November, the national household consumption was 0 compared with the same period last year3%。
The CPI continues to fall, and there are a lot of deflationary remarks on the Internet, is deflation really coming?
Deflation is when the value of money is rising and commodities are decreasing, as opposed to inflation. Inflation tends to be more likely to occur because in the era of credit money, money can be printed, and an appropriate inflation rate is generally controlled to stimulate economic development, usually around 2%.
Inflation that is too high or too low is not conducive to economic stability and development, and 2% is seen as an appropriate level of inflation, and countries are trying to keep inflation at 2%. When the CPI is lower than 2%, it will print money and release water, and when the CPI is higher than 2%, it will raise interest rates and collect water.
For example, the economic cycles of China and the United States are now opposite, and the United States has high inflation and is raising interest rates to control inflation. China's inflation rate is too low, and it is constantly cutting interest rates and RRR to release liquidity.
If inflation is severe, it will lead to hyperinflation, and prices will skyrocket, which will cause an economic crisis. If deflation is serious, prices will fall, and enterprises' enthusiasm for production will decrease, which will also cause the economy to shrink more and more.
However, to judge whether inflation and deflation are not based on a certain month's data, it is necessary to observe a relatively long cycle and analyze it in combination with the actual situation.
In the composition of China's CPI, pork ** has a great impact, and now pork ** has been in a price reduction cycle, as well as the downturn in real estate and industrial overcapacity, which have led to a downturn in CPI.
Although the central bank has been cutting interest rates and RRR to continuously release liquidity, it is difficult to change the consciousness of real estate because it has encountered problems. And industrial overcapacity has always been a problem, and we, as the world's factory, are indeed too rich in capacity, too rolled. In the past two years, the economic downturn in European and American consumer countries has led to a decline in consumption, which has led to a decline in many foreign trade exports, which has also indirectly affected the internal economy. On the one hand, the income of foreign trade enterprises has decreased, the wages of workers have decreased, and natural consumption has decreased, on the other hand, foreign trade cannot be sold, and natural and domestic competition has increased the problem of overcapacity.
The continuous reduction of CPI is objective, undeniable, and it can also be considered that there is a certain degree of deflation. But how serious the impact on the economy will be is up for debate, and it will certainly not be "finished" as some "rhythmic" people say on the Internet.
Now the global economy is not good, and although inflation in Europe and the United States has fallen from last year's peak, it is still higher than normal.
The most important thing is that global economic growth has encountered a bottleneck, and without the outbreak of a new scientific and technological revolution, the East and the West are already competing for stock. The cake is so big, we eat a little more, and the West has to eat a little less.
Compared to Western countries, our economy is in much better shape. Our economy is not growing as fast as in previous years, but it is still one of the fastest growing in the world. The GDP growth rate in 2023 is still 55% or so, while most of Europe is regressing.
For ordinary people, short-term deflation is more bearable than inflation, because it is much better to reduce prices than **. Of course, long-term severe deflation is no less harmful than hyperinflation.
Our deflation cannot last long, pork is already very low, and price reductions will not last. The external Fed's interest rate hike cycle is basically over, the global economy will gradually recover, and foreign trade will not continue to be sluggish.
And although our low-end manufacturing exports have declined a lot, the high-end manufacturing industry has grown against the trend, such as automobiles, photovoltaics, mechanical and electrical products, etc., which is the result of our manufacturing upgrading.
Generally speaking, the short-term downturn in the CPI is not a big problem, our economy is very resilient, and the CPI will definitely increase next year, so don't worry too much. Autumn and Winter Check-in Challenge