CPI or enter the "6.0 era" rate hike or approval

Export growth rate in May fell back to internal and external pressures

According to statistics released by the General Administration of Customs on the 10th, the total value of China's foreign trade imports and exports reached US$301.27 billion in May, an increase of 23.5%. Of this total, exports were US$157.16 billion, an increase of 19.4%, down 10.5 percentage points from the previous month. Imports reached US$144.11 billion, an increase of 28.4%, an increase of 7.6 percentage points from the previous month. The trade surplus for the month was $13.05 billion, a slight increase of $1.627 billion from the previous month.

Analysts believe that the growth rate of imports over exports will become a long-term trend. The slower-than-expected export growth rate is related to the higher base last year, but it cannot ignore the impact of power shortages and financial constraints, and the pressure on internal and external exports has increased.

According to customs statistics, from January to May, China’s total import and export value was US$140.79 billion, a year-on-year increase of 27.4%. Among them, exports were 712.38 billion US dollars, up 25.5% year-on-year; imports were 689.41 billion US dollars, up 29.4% year-on-year. The accumulated trade surplus was US$22.97 billion, a decrease of 35.1% year-on-year.

Zhang Yansheng, director of the Institute of Foreign Economic Affairs of the National Development and Reform Commission's Macroeconomic Research Institute, said that the growth rate of imports in May exceeded exports, reflecting that China's expansion of import policies has achieved certain results. Export growth in May was lower than expected, which was related to the high base last year, but it cannot be ignored that the export is facing increasing internal and external pressures. Wang Jianhui, chief economist of Southwest Securities, believes that the main factors affecting exports at present are domestic rather than external demand changes. The export growth rate will continue to decline or will continue.

The trade surplus in May was still below market expectations. In addition, due to the trade deficit in the first quarter, the surplus in the first five months fell sharply year-on-year. Some analysts believe that under the expectation of a slowdown in foreign economic growth, and with many countries stepping into the interest rate increase channel, external demand may continue to shrink, which in turn affects exports; the decline in import growth rate may be less than the decline in export growth rate. Therefore, the scale of the trade surplus is a large probability event. In this regard, the annual trade surplus will be significantly narrower than the previous year's 188.1 billion US dollars, or nearly 100 billion US dollars.

Inflation expectations rise again, investment banks expect May CPI or new peak

The macroeconomic data for May will be announced on the 10th. As the rise in food prices pushed the CPI to rebound, it basically became the consensus of the industry. The investment bank expects that the CPI in May will exceed the peak of March before, reaching 5.5%-5.6%.

In the May macro data, trade indicators such as exports, imports and trade balances will be announced on the 10th. The Goldman Sachs research report predicts that the year-on-year growth rate of exports will slow down to 20.0% in May, down from 29.9% in April. At the same time, it is predicted that the year-on-year growth rate of imports in May will increase from 21.8% in April to 26.0%. The implied seasonally adjusted monthly growth rate rose from -25.0% in April to -1.2%. The implied trade surplus in May rose to $16.6 billion from $11.4 billion in April.

HSBC expects exports and imports to grow at 15% and 19% respectively in May, with exports falling more than in April, and the trade surplus will rise to $18 billion.

The consumer price index, the industrial product price index, and the industrial added value, one of the market's hot spots, will also be announced next week. The rise in food prices has pushed the rebound in CPI to become a consensus. Food prices have risen in recent weeks, especially as pork prices continue to rise, and prices of vegetables and aquatic products rise.

“The CPI growth in May may increase from 5.3% in April to 5.5%. We expect the food price in the CPI to increase from 11.5% in April to 12.1% in April. We expect non-food prices to increase by 4%. The 2.7% of the month dropped slightly to 2.6%. The PPI growth rate in May may fall to 6.4% from 6.8% in April,” the Goldman Sachs research report said.

UBS economist Wang Tao expects that the CPI data to be released next week will climb to 5.6%. “The persistent drought in the south-central region has caused some vegetable prices to rebound, while pork prices have risen sharply. As a result, food prices are still high. Together with the pressure of rising non-food prices, CPI has risen. At this time, as global prices have recently been corrected, PPI growth is slowing, or has reached its peak, and the PPI growth rate is expected to be 6.2% in May."

Sun Mingchun, head of China Research at Dahe Securities and chief economist in Greater China, also believes that May CPI data will surpass March CPI and reach a new peak of 5.5%. To anchor inflation expectations, the People's Bank of China may raise interest rates by 25 basis points in June.

Wang Tao still maintains the expectation of a rate hike in June, or a rate hike in July. However, credit and liquidity may be less than the first quarter. Qu Hongbin, chief economist at HSBC China, said that in order to curb inflation, the central bank still needs to maintain a tightening policy in the coming months. It is expected that there will be two RRR increases and a rate hike in the coming months. These measures will help to significantly reduce inflationary pressures in the second half of the year.

CPI will enter the "6.0 era" in June

The National Bureau of Statistics will release important macroeconomic data next Tuesday. According to the author's prediction, the CPI in May may exceed 5.5%, hitting a new high again; and the CPI entering the "6.0 era" in June will be a high probability event. In the case that the CPI remains high and is likely to continue to rise, the central bank should raise interest rates to achieve inflation control targets and stabilize inflation expectations.

High prices seriously affect residents' consumption

Inflation has become a major risk to our economy. Judging from the current price increase situation, China's inflation may not be able to see the inflection point expected by some brokerage research institutions in June. The increase in labor costs and the increase in electricity prices may only be the beginning. The pressure of rising prices from China's economy, which has accumulated over the years, is gradually emerging. The driving force for price increases is being transmitted from upstream products to downstream products and from production materials to general consumer goods. The rise in core inflation, the consistent rise in non-food prices basically means the arrival of comprehensive inflation. The current severe drought in the middle and lower reaches of the Yangtze River, which is known as China's granary, and the return of pork prices have further increased the pressure of price increases in the second half of the year.

If we look at it from the perspective of people's livelihood, the current inflation situation is more serious than the CPI data published by the National Bureau of Statistics. First of all, this year's price level is continuing to rise after prices continue to rise to high levels in 2007, 2008 and 2010. The current price level has risen considerably compared to 2006, and the prices of many goods and services may be It has more than doubled! Secondly, China's CPI statistics do not include housing price increases, while China's urban residential housing consumption ranks second in terms of overall consumer spending, second only to food consumption expenditure. If you consider the soaring real estate prices during the same period (average increase of 25% in 2009 and 15% in 2010), the current inflation level will be higher. Third, China's Engel coefficient has been high, food expenditure is more important, and the main driver of this round of inflation is food. In April this year, food prices rose by 11.5%, non-food prices rose by 2.7%, and food prices were 6.2 percentage points higher than the CPI of 5.3% in the same period. The sharp rise in food prices has had a major negative impact on the quality of life of residents.

The impact of high prices on the quality of life of residents is also reflected in the total consumption of society. Judging from the domestic consumption demand in the first four months of this year, as the inflation rate continues to rise, the consumption level of residents has shown a downward trend. The actual consumption growth rate has dropped from 14.5% at the end of last year to 10.8% in April. Demand and quality of life are clearly negatively affected by inflation.

Raising interest rates is a positive measure to fight inflation

Inflation has become a common problem facing the world's major economies. In response to rising inflation expectations, the OECD has recommended in its recently released semi-annual economic outlook report that central banks should consider tightening monetary policy, especially by raising interest rates.

In order to counter the increasingly severe inflation situation, the People's Bank of China has raised interest rates three times this year. In the recently released China Monetary Policy Implementation Report, the central bank has expressed its determination to continue to use interest rate measures to curb inflation. The central bank report said that in the next stage, monetary policy will still maintain the necessary regulation and control to manage prices and inflation expectations. In the choice of monetary policy tools, the central bank no longer relies mainly on adjusting the deposit reserve ratio, but more on the guidance of interest rate instruments on the total social demand.

In terms of currency contraction, the central bank has always preferred to raise the deposit reserve ratio and use the interest rate hike cautiously. Although raising the deposit reserve ratio and raising interest rates can reduce liquidity by shrinking the currency multiplier effect, thereby preventing inflation, as a quantitative tool, the deposit reserve ratio is mainly for the money supply side, by raising the statutory reserve. The rate method inhibits the excessive growth of money and credit, which is a relatively direct way to control the money supply.

Heavy economic data speculates that the central bank will raise interest rates this weekend and then re-qualify

According to the Huaxi Dushi Bao, the People's Bank of China issued 27 billion yuan of the three-month central bank bill on the open market on the 9th, and the issue rate was still unchanged at 2.9168%. The central bank also launched a 10 billion yuan 91-day repurchase operation. At the same time, the three-year central bank bill that was restarted last week was suspended again this week. Some institutions believe that although the central bank did not raise interest rates during the Dragon Boat Festival, the interest rate hike expectations in June did not change much. In view of the current severe inflation situation, the central bank may raise the deposit reserve again in addition to the possible rate hike this weekend. The gold rate, two-pronged approach to curb inflation.

The three-year central bank bill will stop issuing this weekend or the "two-pronged approach"

In June, the price pressure is still very high. In addition to the possibility of raising interest rates this weekend, it may be possible to increase the deposit rate.

The People's Bank of China issued 27 billion yuan of the three-month central bank bill on the open market on the 9th, and the issue rate was still unchanged at 2.9168%. The central bank also launched a 10 billion yuan 91-day repurchase operation. At the same time, the three-year central bank bill that was restarted last week was suspended again this week.

At this point, the central bank withdrew 139 billion yuan in the open market within a week, and this week's maturity of 226 billion yuan, the maximum level of funds due in a single week in June. Within a week, the central bank invested 87 billion yuan in the open market. This is also the central bank's net investment in the open market for the fourth consecutive week.

Although funds were continuously released to the market, the “drought situation” of funds was not effectively alleviated.

As a number of economic indicators for May will be released next week, many organizations believe that the CPI level in May may hit another high peak, so the market's expectations for interest rate hikes are high, and this weekend has become a sensitive period for raising interest rates.

According to the forecast of agricultural product price monitoring by the Ministry of Commerce and the Ministry of Agriculture, the year-on-year growth rate of CPI in May will reach 5.5%-5.6%, a new high this year, and the pressure of rising prices will still be difficult to reduce in the short term. Affected by drought, the output of crops such as vegetables was affected, and prices have rebounded significantly. Coupled with the rising prices of crops such as meat and corn, the short-term adverse factors will constrain the fall in prices, and the pressure on price increases in June is still very high.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said in an interview with the media recently that countries may be forced to enter the interest rate channel.

Some institutions believe that although the central bank did not raise interest rates during the Dragon Boat Festival, the interest rate hike expectations in June did not change much. In view of the current severe inflation situation, the central bank may raise the deposit reserve again in addition to the possible rate hike this weekend. The gold rate, two-pronged approach to curb inflation.  

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