Money

Deflation – China’s economy’s in big trouble

Published

2 years ago

August 10, 2023

China’s economy faces fresh challenges as it grapples with deflation in its consumer sector while factory-gate prices continue to decline.

The world’s second-largest economy is encountering difficulties in reigniting demand, prompting calls for additional policy measures to stimulate growth.

Concerns are mounting that China might be entering an era of sluggish economic expansion similar to Japan’s “lost decades.” During this period, Japan experienced stagnant consumer prices and wages, a sharp contrast to the rapid inflation observed elsewhere.

China’s initial post-pandemic recovery, which started with a strong first quarter, has lost momentum. Weakened demand both domestically and internationally, coupled with policies aimed at bolstering economic activity, have not yielded the desired results.

CPI down

The National Bureau of Statistics (NBS) reported a 0.3% year-on-year decrease in the consumer price index (CPI) for July, contradicting a Reuters poll that anticipated a 0.4% decline.

This marks the first drop since February 2021. Concurrently, the producer price index (PPI) has declined for ten consecutive months, registering a steeper-than-expected 4.4% fall.

This deflationary trend has led to apprehension among consumers and businesses, who are choosing to hoard cash instead of spending or investing, despite lower interest rates.

China’s consumer price index fall is the first negative reading since Japan’s in August 2021, raising concerns about its impact on major trading partners.

Gary Ng, Asia Pacific senior economist at Natixis, noted, “For China, the divergence between manufacturing and services is increasingly apparent, meaning the economy will grow at two speeds in the rest of 2023, especially as the problem in real estate re-emerges. It also shows China’s slower-than-expected economic rebound is not strong enough to offset the weaker global demand and lift commodity prices.”

Real estate crisis

These figures follow a recent report indicating a decline in exports and imports for July.

The real estate sector, a cornerstone of China’s economy, is also grappling with mounting debt issues. This economic environment has prompted consumers and businesses to be cautious with their spending and investment, even as interest rates remain low.

These developments have implications beyond China’s borders, raising concerns about the impact on its major trading partners and the global economy. While many major economies are grappling with inflationary pressures, China’s current deflationary situation sets it apart.

Despite these challenges, Chinese officials have downplayed the risk of prolonged deflation. Liu Guoqiang, deputy governor of the central bank, emphasized that deflationary risks are not expected in the latter half of the year, while acknowledging that the economy requires time to normalize post-pandemic.

China’s CPI decline in July was mainly driven by a steep 26% drop in pork prices, owing to a combination of weak consumption and ample supplies. However, on a month-on-month basis, the CPI actually increased by 0.2%, defying expectations for a decrease, fueled by a surge in holiday travel.

Money

US stocks face tests from Tesla, Netflix earnings

US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

Published

6 days ago

October 19, 2025

Ahron Young

US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

In Short:
– Earnings reports from Tesla and Netflix might affect U.S. stock performance next week amid high inflation concerns.
– Increased market volatility arises from U.S.-China trade tensions and fewer S&P 500 stocks in an uptrend.

This coming week, earnings reports from companies including Tesla and Netflix are anticipated to impact U.S. stock performance.

Investors are also awaiting delayed U.S. inflation data, which could test market stability as it remains near record highs.Recent trading activity has shown increased volatility, influenced by ongoing U.S.-China trade tensions and concerns regarding regional bank credit risks. The CBOE volatility index has seen a rise, indicating increased market uncertainty.

The S&P 500 entered its fourth year of growth amidst these fluctuations, having previously experienced a period of calm. Experts suggest market risks are intensifying as valuations reach peak levels.

Market Volatility

Concerns regarding U.S.-China trade relations escalated last week when the U.S. threatened to raise tariffs by November 1 over China’s rare-earth export policies. President Donald Trump is scheduled to meet with President Xi Jinping in two weeks to discuss these issues.

Despite these challenges, major stock indexes gained ground over the week, with the S&P 500 up 13.3% year-to-date. However, a noticeable decline in the number of S&P 500 stocks in an uptrend raises caution among investors about underlying market weaknesses.

The upcoming third-quarter earnings will be closely monitored, especially as the government shutdown halts economic data releases. Companies like Procter & Gamble, Coca-Cola, RTX, and IBM are due to report. The delayed U.S. consumer price index is also expected to provide crucial insights ahead of the Federal Reserve’s monetary policy meeting on October 28-29.

Money

Australia’s unemployment rate rises to 4.5 per cent

Australia’s unemployment rate rises to 4.5 per cent in September, prompting calls for potential Reserve Bank interest rate cut

Published

1 week ago

October 16, 2025

Ahron Young

Australia’s unemployment rate rises to 4.5 per cent in September, prompting calls for potential Reserve Bank interest rate cut

In Short:
– Australia’s unemployment rate rose to 4.5% in September, the highest since November 2021.
– Economists note a cooling labour market, with fewer job ads and increased participation rate amid rising living costs.

Australia’s unemployment rate increased to 4.5 per cent in September, up from 4.3 per cent in August.It marks the highest seasonally adjusted unemployment rate since November 2021.

Economists suggest that the Reserve Bank should consider another interest rate cut next month. BetaShares chief economist David Bassanese noted a slowdown in employment demand as the labour market struggles to accommodate job seekers.

The number of officially unemployed rose by 33,900 in September, while the employment count increased by 14,900. The labour force expanded by 48,800 people, resulting in a participation rate rise of 0.1 percentage points to 67 per cent, returning to July levels.

In trend terms, the unemployment rate remained steady at 4.3 per cent.

Labour Market

BDO chief economist Anders Magnusson stated that while the unemployment rate has increased, the labour market is cooling, not collapsing.

He pointed out that the 14,900 jobs added in September were slightly below the average for the past year.

A growing participation rate indicates that rising living costs are prompting more individuals to seek employment. Magnusson said the release confirms a gradual cooling of the labour market that keeps the Reserve Bank on track without necessitating immediate action.

He added that hiring activity is slowing, signalled by a 3.3 per cent drop in job advertisements in September, the largest monthly decrease since February 2024.

Despite this, he does not foresee a rate cut in November.

Money

Stocks rebound after Trump eases China trade tensions

Stocks rebound 600 points as Trump eases China trade tensions, signalling optimism in markets following Friday’s sell-off

Published

2 weeks ago

October 14, 2025

Ahron Young

Stocks rebound 600 points as Trump eases China trade tensions, signalling optimism in markets following Friday’s sell-off

In Short:
– Stocks rose on Monday after Trump expressed optimism about trade relations with China.
– The Dow Jones gained 621 points, with significant increases in tech stocks and broad market recovery.

Stocks gained ground on Monday, recovering from Friday’s decline after President Donald Trump expressed optimism regarding trade relations with China, stating they “will all be fine.”The Dow Jones Industrial Average rose by 621 points, approximately 70% of its previous loss. The S&P 500 experienced a 1.6% increase, nearing a 60% recovery of its earlier drop. The Nasdaq Composite increased by 2.3%, bolstered by rebounds in technology stocks.

Oracle’s stock surged over 5%, with AMD and Nvidia seeing 1% and 3% increases, respectively. Broadcom’s stock jumped 10% following the announcement of a partnership with OpenAI.

Trump’s comments hinted that he might not impose a significant increase in tariffs on China, which had previously caused market turmoil. Vice President JD Vance similarly indicated a willingness to negotiate with China, while also asserting that the U.S. holds advantages in potential trade discussions.

Broader Recovery

Monday’s trading saw a positive shift with four out of five S&P 500 stocks rising, indicating widespread recovery. Small-cap stocks also made gains, with the Russell 2000 rising over 2.5%.

Market concerns persist, however, with a government shutdown continuing and a major payroll deadline approaching on October 15. Earnings reports from major financial institutions, including Citigroup and JPMorgan Chase, are expected this week, potentially impacting market sentiment.