CPI is the abbreviation of Consumer Price Index in English, which means price index.
The price index is an indicator that measures the level of prices. Under normal circumstances, rising CPI means rising prices of consumer goods, which may lead to inflation, leading to currency depreciation, and ultimately shrinking residents’ income and reducing purchasing power.
Under normal circumstances, the CPI level should remain fluctuating within a certain range to avoid excessive rise or fall, so that the social economy is in a state of healthy development.
Generally speaking, the level of cpi directly affects the introduction and intensity of the country’s macroeconomic control measures, such as whether the central bank adjusts interest rates and whether to adjust the deposit reserve ratio. At the same time, the level of cpi also indirectly affects changes in the capital market (such as the stock market).
The basic functions of cpi include the following:
1. Measure inflation (deflation). cpi is an important indicator of inflation. Inflation is a general and continuous rise in the price level. The level of cpi can explain the severity of inflation to a certain level;
2, national economic accounting. In national economic accounting, various price indices are needed. For example, the consumer price index (cpi), producer price index (PPI) and GDP deflator are used to calculate GDP to eliminate the influence of price factors;
3. Contract indexation adjustment. For example, in salary negotiation, because employees want salary (nominal) increase to be equal to or higher than cpi, they hope that nominal salary will automatically adjust with the increase of cpi. The timing of its adjustment is usually after inflation occurs, and the magnitude is lower than the actual inflation rate;
4. Reflect changes in currency purchasing power: Currency purchasing power refers to the number of consumer goods and services that can be purchased per unit of currency. As the consumer price index rises, the purchasing power of money falls; vice versa. The reciprocal of the consumer price index is the currency purchasing power index.
5. Reflect the impact on the real wages of employees: An increase in the consumer price index means a decrease in real wages, and a drop in the consumer price index means an increase in real wages. Therefore, the consumer price index can be used to convert nominal wages into real wages.
6. The impact of cpi on the stock market: Under normal circumstances, when prices rise, stock prices rise; when prices fall, stock prices also fall.
What does the rise in cpi mean?
Cpi rise is manifested in the rise in consumer product prices, inflation, and currency devaluation, which will shrink people’s income, reduce purchasing power, and decline in welfare.
For example, in the past year, the consumer price index has risen by 2.3%, which means that the cost of living has risen by an average of 2.3% over a year ago. When the cost of living increases, the value of your money decreases. In other words, a 100 yuan note received a year ago can only buy goods and services worth 97.75 yuan today.
Therefore, rising cpi means economic instability and market economic turbulence, which will cause changes in people’s living standards. The cpi level should remain fluctuating within a certain range, and should not rise or fall excessively.
What does cpi drop mean?
Cpi decline is manifested in the decline in the price of consumer goods, the increase in people’s purchasing power, and the increase in welfare. However, contrary to its excessive rise, it will have an adverse effect on producers, causing their profits to fall, frustrating production enthusiasm, and reducing supply, thereby reducing the number of workers and increasing the unemployment rate.
From a short-term perspective, downward prices are beneficial to consumers, but if the duration is too long, it will cause business depression and affect income growth. Consumers will ultimately be affected.
cpi index for stocks, generally speaking, the price rises, the stock price rises; the price falls, the stock price also falls.
Theoretically, there is no functional relationship between cpi and the rise and fall of the stock market, but it can indeed affect the stock market through the supply and demand relationship of capital.
The continued rise of cpi will trigger structural adjustments in the stock market. The continuous rise of cpi also reminds stock market investors to be wary of asset price risks. Generally speaking, when the cpi continues to rise, the direction of investment will shift to a high-return investment market such as the stock market.
Cpi index release time
The time when the National Bureau of Statistics releases cpi is generally around the 13th of the month after the month, and it is extended to around the 20th of the month after the quarter and year. The cpi announcement time for Hong Kong, China is around the 20-23 of next month, and the monthly cpi announcement time for Taiwan, China is around 5-8 the beginning of next month.