When we listen to and read some financial articles, we often hear about M2, CPI, PPI and other proper nouns, what do these terms mean, let's briefly understand some of them today.
m0
Cash in circulation. Refers to outside the banking systemThe sum of cash on hand for individual units and cash on hand for residents
It is closely related to consumption, and its high value represents the abundance and abundance of the people.
m1
Narrow Money** Volume. Yesm0 plus the unit's demand deposit in the bank
It reflects the actual purchasing power in the economy, represents the change of capital tightening of residents and enterprises, and is a leading indicator of the fluctuation of the economic cycle. Liquidity is second only to M0.
m2
The amount of broad money**. YesM1 plus the fixed deposits of units in the bank and the savings deposits of urban and rural residents in the bank and the deposit of ** customers。The difference between M2 and M1, i.e. the sum of the unit's fixed deposit and the individual's savings deposit, is usually referred to as quasi-money.
Money in economics usually refers to M2
At the same time, it reflects the actual purchasing power and potential purchasing power; Liquidity is weak, reflecting changes in aggregate social demand and future inflationary pressures.
m3
The amount of money in the broadest sense. m2PlusHighly liquid** and other assets.
In general, we can reveal the health of the macroeconomy through changes in M1 and M2 growth rates:
If M1 grows faster, consumption and end markets are active;
If M2 grows faster, investment and the middle market will be active;
If M1 is too high and M2 is too low, it indicates strong demand, insufficient investment, and inflation risk.
If M2 is too high and M1 is too low, it indicates that investment is overheated, demand is not strong, and there is a risk of asset bubble.
cpi
Consumer Price Index, also known as Household Consumption Index. is a reflectionResident familiesA macroeconomic indicator of changes in the level of consumer goods and services purchased** is also a measure of inflation.
ppi
Production** Index. It's measuringIndustrial enterprisesThe index of the trend and degree of change of product ex-factory is an important economic indicator that reflects the change of the production field in a certain period.
CPI can be regarded as the statistics of retail prices, and PPI is the statistics of factory wholesale prices, because of their different statistical objects, so PPI is the leading indicator of CPI to a certain extent. CPI**, which generally represents an increase in inflation, a decrease in prices, a decrease in the real purchasing power of wages, and vice versa.