### Summary
The blog emphasizes that the war on inflation has been won, with the Consumer Price Index (CPI) showing a 12-month inflation rate of +3.3%. However, BLS's imputation of shelter costs using lagged data means that the CPI would be significantly below the Fed's target of 2%. The market believes that the current Fed Funds rate will remain unchanged for the rest of the year.
### Facts
- The economists at three Regional Federal Reserve Banks believe that a recession is coming, despite the official forecast of "no recession" from the Fed. The probability of recession is higher than during the last two recessions.
- The Conference Board's Leading Economic Indicators (LEI) have been negative for 16 consecutive months, which has a 100% track record in predicting recessions.
- The freight industry is experiencing a recession, with the Cass Freight Index down -8.9% over the year. Housing is also struggling, with mortgage loan applications at 30-year lows and significant declines in new and existing home sales.
- Seasonally adjusted retail sales for July were +0.7%, but the actual raw data fell -0.4% from June to July. The weak data suggests a different story than what the seasonally adjusted numbers portray.
- Home Depot, Target, and Walmart reported lower Q2 revenues, with general merchandise sales at Walmart contracting.
- Industrial Production rose 1.0% in July, driven by utility output and auto production. However, the seasonal adjustment may be questionable.
- Inflation rates in developed countries are just above 2%, with China experiencing deflation. One-year inflation expectations are rapidly falling, which is positive for controlling inflation.
- China's economy is faltering, with industrial production and retail sales declining. Q2 real GDP growth is anemic, and the crisis in the real estate sector is worsening. China's struggles will have a negative impact on the global economy and its major trading partners.
### Emoji
- 📉: Recession
- 📊: Economic indicators
- 🚂: Freight industry
- 🏘️: Housing market
- 🛍️: Retail sales
- 🏭: Industrial production
- 💰: Inflation
- 🇨🇳: China's economy
- 📉💼: Global economy
### Summary
JD.com, China's biggest ecommerce retailer, reported a 50% surge in net income and 7.6% increase in revenue, beating expectations, due to its low-cost strategy attracting customers during China's economic downturn and increased competition.
### Facts
- 💹 JD.com's net income rose 50% to 6.6 billion yuan ($0.9 billion) and revenue increased 7.6% to 287.9 billion yuan ($39.7 billion), exceeding projections.
- 📈 The company gained market share from rivals including Baidu, Alibaba, and Pinduoduo.
- 💰 Service revenue jumped 30% to 54.1 billion yuan ($7.5 billion).
- 🛒 JD.com attracted more vendors and customers with its low-cost strategy and "10 billion yuan" subsidy program.
- 🗣️ CEO Sandy Xu attributed the solid performance to the company's enhanced business structure and supply chain capabilities.
### China's Economic Woes
- 🇨🇳 China's economy has faced challenges including slowing growth, rising debt, a property bubble bust, and weak domestic demand.
- 📉 Gross domestic product (GDP) rose only 3% last year, the slowest pace in decades.
- 🛍️ Retail sales fell 8% month-over-month in July, with deflation of 0.3% year-over-year, reflecting weak domestic demand.
- ⬇️ Deflation can harm economies by discouraging spending and borrowing, leading to a slowdown in economic activity.
### Summary
The Chinese economy has slipped into deflationary mode, with retail sales, industrial production, and exports all missing forecasts. Shrinking domestic demand and a debt-fueled housing crisis are the main causes behind this slowdown.
### Facts
- 📉 Retail sales in July grew by 2.5% year-on-year, compared to 3.1% in June.
- 🏭 Value-added industrial output expanded by 3.7% y-o-y, slowing from 4.4% growth in June.
- 📉 China's exports fell by 14.5% in July compared to the previous year, and imports dropped 12.4%.
- 💼 Overall unemployment rate rose to 5.3% in July, with youth unemployment at a record 21.3% in June.
- 📉 Consumer Price Index-based inflation dropped to (-)0.3%, indicating a deflationary situation.
- 🏢 China's debt is estimated at 282% of GDP, higher than that of the US.
### Causes of the slowdown
- The debt-fueled housing sector collapse, which contributes to 30% of China's GDP.
- Stringent zero-Covid strategy and lockdown measures that stifled the domestic economy and disrupted global supply chains.
- Geopolitical tensions and crackdowns on the tech sector, resulting in revenue losses and job cuts.
### Reaction of global markets
- The S&P 500 fell 1.2% following the grim Chinese data.
- US Treasury Secretary warns China's slowing economy is a risk factor for the US economy.
- Japanese stocks and the Indian Nifty were also impacted.
- China's central bank cut its benchmark lending rate, but investors were hoping for more significant stimulus measures.
### Global market concerns
- China's struggle to achieve the 5% growth target may impact global demand.
- China is the world's largest manufacturing economy and consumer of key commodities.
- A slowdown in China could affect global growth, with the IMF's forecast of 35% growth contribution by China seeming unlikely.
### Impact on India
- India's aim to compete with China in the global supply chain could benefit if Chinese exports decline.
- However, if China cuts back on commodity production due to slowing domestic demand, it may push commodity prices higher.
### Summary
China's fiscal revenue rose 11.5% in the first seven months of 2023, but at a slower pace than the previous six months, indicating a loss of economic momentum.
### Facts
- 💰 China's fiscal revenue increased by 11.5% in the first seven months of 2023.
- 💸 Fiscal expenditure grew by 3.3% to 15.2 trillion yuan ($2.10 trillion).
- 📉 In July, fiscal revenue only rose 1.9% year on year, slower than the previous month's increase.
- 📉 Fiscal expenditure fell 0.8% in July, narrowing the decline compared to the previous month.
- 🌍 China's economy grew at a sluggish pace in the second quarter due to weak demand domestically and internationally.
- 📉 The consumer sector in China experienced deflation in July, with analysts predicting persisting price stagnation for the next six to 12 months.
China's real estate crisis, caused by a crackdown on risky behavior by home builders and a subsequent housing slowdown, is spreading to the broader economy, leading to sinking sales, disappearing jobs, and a decline in consumer confidence, business investment, and stock markets.
China's fiscal revenue increased by 11.5% in the first seven months of 2023, but the growth rate was slower than the previous six months, indicating a potential decline in the economy's momentum.
China's economy, which has been a model of growth for the past 40 years, is facing deep distress and its long era of rapid economic expansion may be coming to an end, marked by slow growth, unfavorable demographics, and a growing divide with the US and its allies, according to the Wall Street Journal.
China's economic slump is worsening due to the prolonged property crisis, with missed payments on investment products by a major trust company and a fall in home prices adding to concerns.
Financial uncertainty in China has led to a lacklustre second half for Hong Kong's retail sales, increasing the risk of deflation and undermining consumer confidence, according to PwC.
China's economic model, driven by industrialization and exports, is showing weaknesses with an imbalanced economy, low demand, slumping trade, and a struggling property sector, highlighting the need for structural reforms to boost domestic consumption and confidence.
Profits at China's industrial firms fell for a seventh consecutive month in July, declining by 6.7% year-on-year, as weak demand and a faltering post-pandemic recovery continue to squeeze companies in the world's second-largest economy.
Costco stores in China are experiencing high foot traffic and strong sales, contrasting with slower retail sales growth in the country, as foreign brands continue to expand and target the premium market. However, economic uncertainty and a decline in ad spending raise concerns about China's future growth.
Consumer spending in China rebounded in August, with all categories, including apparel, automotive, food, furniture, appliances, and luxury, experiencing increased sales compared to July, according to a survey by the China Beige Book. Retail sales in July rose by 2.5% year-on-year, raising concerns about China's economic growth, but the August survey showed a surge in spending, particularly in the services sector, which saw continued strength in travel and hospitality. Additionally, corporate borrowing increased as the cost of capital declined, indicating a boost in business activity. However, China's property sector continued to worsen, with house prices barely growing and home sales declining.
UBS reports higher than expected profits, job creation in the US slows, and markets rally on weaker economic data and hope for a pause in interest rate hikes. China's factory activity shrinks but at a slower pace, while retail sales increase. There are opportunities for investors in other Asian markets.
Chinese consumer spending has rebounded in certain sectors, but concerns persist over the property market and GDP growth falling below 5%, according to Shehzad Qazi, managing director of China Beige Book.
Chinese factory activity unexpectedly grew in August, fueled by improving local demand and an increase in new orders, although the Chinese economy still faces challenges due to weak external demand and a potential real estate crisis.
Retail sales in the UK increased by 4.1% in August, with non-food items experiencing the strongest growth due to higher spending on health and beauty, although clothing and footwear sales were weaker; however, the increase in sales was partly driven by rising prices, indicating that consumers are buying fewer items but spending more.
China's exports are expected to contract at a slower pace in August, with a projected fall of 9.2%, as manufacturers continue to face pressure due to weak overseas demand and a shrinking labor market.
China's exports and imports continued to decline in August due to weak overseas demand and sluggish consumer spending, posing challenges to the country's economic growth targets.
China's passenger vehicle sales experienced growth in August, driven by discounts and tax breaks on environmentally friendly and electric cars, despite a weak economy, and Tesla's share of the Chinese electric vehicle market nearly doubled.
The economic uncertainty in China has led middle-class consumers to shop at wholesale markets for cheaper goods, impacting the luxury industry and highlighting the weakness in household demand in the country's struggling economy.
New home sales in Beijing have increased by 16.9% in the week of September 4-10, indicating that government efforts to revive the property sector are having an impact in the Chinese capital. However, the rebound in sales is not reflected across the rest of China, with sales falling 20% on average nationwide.
China's consumer prices returned to positive territory in August, increasing by 0.1% from a year earlier, while producer prices fell for the 11th consecutive month; analysts expect consumer prices to recover and services inflation to pick up as energy prices stabilize and the output gap narrows.
China's economy is expected to grow less than previously anticipated due to struggles in the property market, leading economists to predict further downgrades and posing risks to both the domestic and global economy.
Retail sales in the US remained resilient in August, with a 0.6% month-on-month increase, surpassing expectations of 0.2%, indicating a positive trend for the economy.
August retail sales in the US exceeded expectations, with a 0.6% increase driven by higher gas prices, although underlying goods and services spending lost momentum and July's gain was revised lower, according to the Commerce Department.
Asia-Pacific markets rallied after China's August economic data exceeded expectations, with retail sales and industrial production showing stronger growth, although fixed asset investment fell slightly below forecast; meanwhile, the US stock market also ended higher as producer prices increased more than expected.
US retail sales have exceeded economists' expectations for the second consecutive month, with higher gas prices being a contributing factor.
China's factory output and retail sales grew at a faster pace in August, but declining investment in the property sector poses a threat to the country's economic recovery.
China's positive retail sales and factory production data, coupled with expectations of a peak in interest rates at major central banks, are likely to boost equity markets at the European open.
Economic activity in China appears to improve in August as industrial production and retail sales show growth, however, the real estate sector continues to face challenges with property investment and sales declining, leading Moody's to downgrade its outlook for the sector.
Chinese economic data showed signs of improvement in August, with retail sales and industrial production exceeding expectations, and key commodities experiencing growth, although challenges remain in the property market.
China's stock market has slumped due to worrying economic data including falling prices, missed expectations in retail sales and industrial production, and plunging real estate investment, leading analysts to express concerns about an impending downward spiral in the Chinese economy.
China's economic data for August shows a mixed picture, with retail sales and production on the rise, property investment declining, and the urban jobless rate ticking downward, leading experts to believe that while there may be modest improvements in growth, a strong recovery is still unlikely.
The outlook of U.S. companies on China's markets in the next five years has hit a record low due to factors such as political tensions, tariffs, slow Covid recovery, and issues in the real estate market; however, complete decoupling between the two economies is unlikely.
China's economy showed positive signs of recovery in August, with an increase in industrial output, retail sales, and consumer inflation, indicating resilience despite concerns of "stagnation" or "collapse" in Western media reports; willingness to spend also recovered, with an increase in residents' income, per capita consumption spending, and domestic tourism; furthermore, China's exports remained resilient, with a steady increase in the export share of intermediate and capital goods, outweighing the decline in the export share of consumer goods.
China's economy is still expected to grow 5% this year, despite outsized expectations and challenges such as a bloated property sector and demographic issues.
China is seeking to increase productivity and efficiency in its industrial northeast region, facing economic challenges such as an aging population, declining birthrate, and a real estate crisis, but some economists argue that the government's focus on industrial investments is outdated and lacks measures to stimulate consumer confidence and spending.
China's small economic rebound appears to have stalled in September, with weak retail sales, manufacturing production, and loan growth, raising concerns about anemic third-quarter growth and the country falling short of its growth target.
China's factory activity expanded for the first time in six months in September, indicating that the country's economy is beginning to stabilize after a period of decline.
China's factory and services sectors experienced slower growth in September due to weak external demand, despite an increase in output, with the property slump, falling exports, and high youth unemployment clouding the economic outlook.
China's factory activity expanded at a slower pace in September, with sluggish external demand weighing on the outlook, although output increased, according to a private-sector survey.
China's demand for major commodities such as copper, iron ore, and oil is exceeding expectations due to growth in the green economy and manufacturing sector, according to Goldman Sachs.
China's economic malaise is attributed to a failure to implement necessary reforms, with structural threats to stability increasing and growth expectations diminishing, according to a report by Rhodium Group and the Atlantic Council, which warns that the country's goal of becoming the world's largest economy may be delayed.
The Chinese economy is predicted to grow about 5.7 percent in the fourth quarter, surpassing the 5 percent annual growth target, driven by unleashed services consumption potential, accelerated infrastructure investment, and growth in high-tech and private manufacturing investment, according to the BOC Research Institute.
Most Japanese companies expect a continued slowdown in China's economy until 2025, with many looking to shift production to other markets, according to a Reuters poll, despite recent signs of recovery in China's economic activity.
