The treasury is finally willing to spend money
1
On September 27, the last important economic data for August, the profits of industrial enterprises above designated size, were also released, rebounding a lot, in line with expectations.
Combined with the August fiscal revenue and expenditure data released by the Ministry of Finance in mid-September, it is clear that the fiscal department has increased spending in the face of a further widening gap between revenue and expenditure.
According to relevant data, the year-on-year growth rate of general public budget revenue and expenditure in August was -4.6 and 3.8% respectively.
The changes in income and expenditure from June to August were 5.6%→ 1.9% →-4.6% year-on-year; The year-on-year growth rate of expenditure was -2.5%, → 0.8% → 3.8% respectively;
To put it bluntly, fiscal tax revenue is still declining, but the growth rate of spending money has increased significantly.
This is likely to be an important force supporting the marked economic upturn in August.
Why do you say that?
Looking at the following year-on-year chart of fiscal revenue and expenditure (gray line), combined with this year's economic data changes, it will be very obvious that fiscal spending can be well supported by maintaining the appropriate strength.
In the first quarter of this year, the intensity of fiscal spending was slightly lower than in the second half of last year, but because the epidemic has just been released, "temporary retaliatory consumption" has led the economy to achieve good growth.
But after March, the intensity of fiscal spending dropped instantly, and each of us clearly felt the slowdown through the economic data.
In the words of my small business friends around me, "This year's business feels even harder than last year!" ”
There is no way, the direct reason is that there is less money spent above, and localized debt makes it impossible for money to continue to flow down.
It is a welcome thing that fiscal spending in August returned to the level of the beginning of the year (gray arrow circled in the figure).
As long as the government is willing to spend money, it can create demand, money can flow down well, the balance sheets of enterprises and residents can improve relatively quickly, and there is hope for economic recovery.
2
The core question or key question now is whether after September, will the fiscal level increase its efforts to spend money – fiscal easing?
The author's current feeling and judgment is that it will not be very loose, and it will most likely be supplemented with the help of the central bank's "quasi-fiscal" means!
The current latest fiscal policy space is:
1. The top level allows local governments to issue special refinancing bonds to resolve the debt pressure in some places, and the upper limit is 1.5 trillion yuan;
2. Special bonds were issued 3.3 trillion yuan in September, completing 90%, leaving less than 300 billion yuan.
In other words, after the money raised from the bonds issued in August and September ran out in October, the ammunition in the budget for the fourth quarter was basically gone.
What to do?
On September 27, the central bank's third quarter monetary policy meeting ended, and a similar statement was issued, in which the central bank said that it would increase its support for the economy, and even cut the RRR and interest rates in the fourth quarter (market interpretation, the details of the monetary policy implementation report are needed to be better determined).
This is consistent with the inference in the author's previous article, and the task of stabilizing the economy will be handed over to the central bank.
But how can the central bank be stable?
The central bank can only lend with the help of banks!
The author speculates that the central bank will most likely be like the second half of last year, when the fiscal budget is completed, and the central bank will use policy banks to launch structural financial tools to support infrastructure and other projects.
The model is that policy banks inject a part of their capital and then attract private capital to participate in the project – a disguised "quasi-fiscal" means!
If this judgment holds, the economic recovery in the fourth quarter depends entirely on how much money the central bank can print through this model.
According to last year's 1 yuan can be raised by 9 yuan, if the central bank can come to 50 million, it can almost hedge the impact of the slowdown in fiscal spending in the fourth quarter on the economy to a certain extent.
The specific situation depends on the actual operation of the central bank.
In short, the signal from the central bank's monetary policy meeting in the third quarter was very positive, and it announced that it would "promote the recovery of low prices... Increase counter-cyclical and cross-cyclical adjustments."
As long as the debt reduction plan is clear and fiscal spending is up to date (fiscal policy is substantially loose), there will be a chance for a sustained economic recovery in August.
3
As for many people, they do not feel that the economic recovery began in August, not because they feel that something is wrong, but because the economic recovery in August is not strong enough to change the whole "water temperature".
Why do you say that?
Because statistics give people an illusion!
If I were to say, the economic upturn in August was like a continuous decline in stock prices, only to suddenly close a long white candle, but it did not recover the decline, but only turned around, and individual data looked awesome under the effect of a low base.
For example, in August, the profits of industrial enterprises above designated size increased by double digits year-on-year, and the growth curve in the following chart seems to have increased significantly. But looking at the absolute amount of profit, it is only about the same as in June this year.
If you look closely at the data structure, it is clear that the enterprises with the largest interest rate improvement are concentrated in the middle and upper reaches, such as electricity, heat, gas and water production and supply, and the downstream improvement is general.
This also makes it difficult for the vast majority of us ordinary people to feel it.
As the so-called "mid-upstream look at PPI (commodity prices), manufacturing looks at volume (exports), downstream looks at profit margin (consumption power)", when the expansion of external demand begins and fiscal spending improves residents' income, most of us may feel the rising water temperature.
In short, the economic upturn in August is technically a "marginal improvement", not as bad as in April, May, June and July, and has not yet reached the point where the economy has completely returned to the normal track.
In the PBOC's latest formulation: "... Momentum has increased, but challenges such as insufficient demand are still faced. We must continue to work hard and take advantage of the momentum..."
Next, it depends on how the policy can be concrete and effective to "continue to exert force and ride on the victory".
Written at the end:
The data was released, I am optimistic that many people do not look at the data, easy to be stunned by the data, so with the profit announcement of industrial enterprises above designated size in August, I will share with you a material "Industrial Enterprise Profit Analysis Framework and Industry Asset Pricing Law", hoping to help you learn how to analyze corporate profits, and deeply understand its relationship with industrial output value above designated size and PPI.