We have launched E-mail Alert service,subscribers can receive the latest catalogues free of charge
Focus on the Demand Changes Induced by Volatile Trend of Prices (No. 4, 2020)
2020-02-24
By Wang Likun, Institute of Market Economy, DRC
Research Report, No. 4, 2020 (Total 5748) 2020-1-10
Abstract: The intricate and complex price trend in 2019 was manifested in the deviation of CPI and PPI performance and their internal structural divergence. On the one hand, pork prices boosted the rise of food CPI (consumer price index) and means of livelihood PPI (producer price Index); on the other hand, the growth rate of core CPI, service industry CPI and the means of production PPI, especially the ex-factory prices of mid-to-down-stream manufacturing industries had either eased or continued a downward trend. Although the rise of pork and some food prices has arrested the attention of social circles, statistics show that the overall impact on residents’ daily life is relatively limited. But it needs to be noted that the indexes such as CPI and PPI have exerted a notable effect, indicating that the aggregate demand is inadequate, the growth rate of consumption service industry becomes slow down and the profitability of manufacturing industry is declining across the board. Based on a comprehensive judgment, the need for economic stabilization at present has become all the more urgent. Some policy options are raised as follows. In order to boost the aggregate demand and alleviate the burden of enterprises, we need to take measures such as institutional innovations, overall but asymmetric cuts in interest rate, structural tax reduction and price reform. In the meantime, the adjustment of monetary policies needs to be made in light of the trend of core CPI performance. The key to price stabilization lies in ensuring supply, enriching the people and stabilizing employment.
Key words: CPI, PPI, inadequacy in demand, boost consumption, cut in interest rate
