Taking all factors into account, the market expects that China's economy will show a steady slowing trend in July and even in the third quarter. The slowdown in the economy will help narrow the price increase, so there will be no stagflation.
The Financial Times reported that it is a basic judgment that prices will continue to run high in the third quarter, and the sustained economic downturn is also the fundamental expectation of the market. However, the market does not overly worry about the economic decline in the third quarter. Most market institutions believe that the year-on-year GDP growth rate in the third quarter will still be above 9%, and there is no need to worry about stagflation.
Cao Yuanzhen, chief economist of BOCI, believes that the GDP will increase by 9.4% year-on-year in the third quarter. Despite the downward risks, there are no major problems with China's economy in the short term, and the possibility of a "hard landing" is small. The economy will still maintain a growth rate of more than 9% in the third quarter, and controlling inflation remains the focus of recent macroeconomic policies.
The forecast report from Bank of Communications shows that the GDP will grow by 9.3% year-on-year in the third quarter. It is expected that with the retreat of price increases and the easing of policy tightening in the fourth quarter this year, the economic growth rate will stabilize and rebound. It is estimated that the economic growth rate in the third quarter will be 9.3%, and in the fourth quarter it will be 9.5%. The overall economic growth for the whole year should be maintained at around 9.5%.
The National Bureau of Statistics announced that the GDP growth rate in the first half of the year was 9.6%, which is a significant decline compared to the GDP growth rate of 11.1% in the first half of last year. Since the second half of last year, the GDP growth rate has experienced a gradual slowdown, a slight decline, and a tendency towards stability. The GDP growth rates were 9.6% in the third quarter of last year, 9.8% in the fourth quarter, 9.7% in the first quarter of this year, and 9.5% in the second quarter, showing a continuous four-quarter trend of slowing economic growth. The data released by the Federation of Logistics and Purchasing on August 1st showed that the PMI (Purchasing Managers' Index) in July was 50.7%, down 0.2 percentage points from last month, the lowest since March 2009. As a leading economic indicator, the continuous four-month decline in PMI indicates that the slowing of the economic growth rate will be the main characteristic of the next phase of macroeconomic operations.
The economic growth in the third quarter will steadily decline, and there is no need to worry about stagflation.
Hu Da, an analyst at Guotai Junan, said that the new changes in the central bank's monetary policy rhetoric are worth paying attention to. In the short term, it is expected that the CPI growth rate in July will reach 6.3% to 6.5%, and the central bank still has a strong motivation to raise interest rates in August.
A recent report by Xinhua News Agency said that the expectations for an interest rate hike in August have increased, and it is expected that around August 10th will be an important time window. The report estimates that the year-on-year CPI growth rate in July may be 6.3%. Last Wednesday, the overseas edition of the People's Daily published an article by Xia Bin, a member of the Monetary Policy Committee of the People's Bank of China, openly supporting the raising of deposit interest rates in China to completely get rid of negative interest rates. Analysts pointed out that this might be a hint from the central bank to further raise deposit interest rates.
Lu Zhengwei, chief economist of the Capital Operation Center of Industrial Bank, said that the possibility of an interest rate hike in August is very high, and fighting inflation is still an important task. Currently, the central bank has not loosened its monetary policy, and the development of the current price situation also means that the task of keeping the CPI within 5% for the whole year will be quite challenging.
On July 23rd, the Central Political Bureau held a meeting to study the current economic situation and economic work, emphasizing again that maintaining stable overall price levels as the primary task of macroeconomic regulation in the second half of the year. Since the beginning of the year, the central bank's monetary policy has maintained the rhythm of "one reserve requirement ratio increase per month" and "one interest rate hike every other month", causing the market to speculate that an interest rate hike in August is imminent.
From the comprehensive analysis reports, most institutions believe that the inflation pressure this year will peak in June and July, and will decline in the second half of the year as pork prices fall and the carryover effect weakens.
Professor Lu Jun, director of the Department of Finance at Sun Yat-sen University, said that due to the impact of the earlier rapid price increase "carryover effect", June and July this year may be the highest point of the CPI for the whole year. From the aforementioned data, the new price increase factors driving price increases have eased somewhat, and it is expected that there is a relatively large possibility that the CPI will turn in July.
The report issued by Northeast Securities also stated that the food price ring ratio increase is expected to slow down, and the pork price increase has significantly slowed down in the past two weeks. Even considering the rise in non-food prices, the possibility of the CPI increasing in July is relatively small. It is expected to increase by about 0.3%, while the carryover effect will decrease by 0.4 percentage points, making it difficult for the CPI to break new highs.
According to the analysis by Tang Jianwei, senior macroeconomic analyst at the Financial Research Center of Bank of Communications, quoted in the Economic Reference Newspaper (Weibo), based on the data monitored by the Ministry of Commerce and the Ministry of Agriculture, although the increase in edible agricultural product prices in July has narrowed, they have still maintained a slight upward trend. Meanwhile, non-food prices remain high, and it is preliminarily judged that the year-on-year increase in the CPI in July will remain at around 6.3%.
Based on the average price change of major foods in 50 cities released by the National Bureau of Statistics, the prices of pork and vegetables dropped significantly in the late part of July compared to mid-July. Among all 29 types of food, more than half saw a decline in their ring ratio prices. According to the monitoring by the "National Agricultural Products Wholesale Market Information Network" of the Ministry of Agriculture: On July 29, 2011, the agricultural product wholesale price index fell by 1.80% in the ring ratio, and the "basket of goods" product wholesale price index fell by 2.20% in the ring ratio.
According to the data released by the Ministry of Commerce, the key-monitored edible agricultural product prices fell from July 25 to 31. Among them, the average wholesale price of 18 types of vegetables in major large and medium-sized cities nationwide fell by 3.1%, with the decline expanding by 1.6 percentage points. Although the retail price of domestically packaged rice rose by 0.2% compared to the previous week, the increase narrowed by 0.3 percentage points.
With the decline in agricultural product prices, the CPI in July may see a turning point.
According to the data release schedule of the National Bureau of Statistics, the main macroeconomic data for July will be announced today. The financial channel of China News comprehensively reported that due to the decline in agricultural product prices, the CPI in July may see a turning point. Affected by carryover factors, etc., the year-on-year increase will still remain at a high level of more than 6%.