### 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
Chinese authorities have introduced new measures to support investor confidence in the country's stock market, including cuts in trading costs and relaxed rules on share buybacks. This comes after recent declines in both the stock and bond markets and concerns over China's economic outlook. There are also growing concerns about youth unemployment and issues in the property market, which could potentially lead to broader economic problems.
### Facts
- 📉 The China Securities Regulatory Commission has announced measures to make trading easier and boost investor confidence.
- 💰 These measures include reducing handling fees charged by brokers and relaxing rules on share buybacks.
- ⏰ The regulator is also considering extending trading hours and reducing stamp duty on share trades.
- 📉 Chinese stock markets have experienced declines, with the CSI 300 index down nearly 6% in the past two weeks and the Hang Seng index in Hong Kong suffering its biggest weekly fall in two months.
- 📉 The declining investor confidence is linked to China's deteriorating economic outlook, including faltering growth, weakening demand, and rising deflation.
- 🧑🎓 There are increasing concerns about youth unemployment, with many young graduates opting not to work or engaging in short-term roles due to a lack of high-paying job opportunities.
- 🏢 Worries about the property market have also emerged, as several major property developers have defaulted on their debts and there are concerns of contagion to the broader economy and financial sector.
- 🏢 Country Garden, China's largest private housebuilder, reported a sharp fall in sales and missed interest payments on its bonds, raising concerns about the company's viability and the broader impact on the property sector.
- 💡 Analysts suggest that the government may introduce more economic stimulus measures in response to the situation, but there are concerns that the construction sector is in structural decline and could contribute to a slowdown in GDP growth.
### 🌍 Additional Information and Context
- Since August 2021, China's stock market has faced substantial declines due to regulatory crackdowns on several industries, leading to decreased investor confidence.
- China's property market is a significant driver of economic growth, but concerns over excessive debt levels, oversupply, and financial risks have raised concerns about a potential bubble and the stability of the sector.
- The Chinese government has taken steps to address the issues in the property market, including efforts to stimulate activity, but the situation remains uncertain.
- Overall, the combination of economic slowdown, declining investor confidence, youth unemployment, and concerns over the property market poses challenges to China's economic stability and growth prospects.
China's property market is seeing strong sales and rising rents, indicating a continuing demand for housing that pessimists are missing, according to veteran economist Hong Hao.
China's largest private real estate developer, Country Garden, is in financial trouble, missing bond payments and posting a record loss, signaling further concerns about the country's property sector as housing prices and foreclosures continue to rise, while other economic indicators, such as industrial output and retail sales, fall short of expectations; these developments are raising concerns about the overall health of China's economy and its future growth prospects.
China is implementing measures to boost household spending, ease property policies, increase car purchases, improve conditions for private businesses, and bolster financial markets in an effort to revive the economy's recovery and improve the business environment.
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.
China's economy is showing signs of improvement, with officials in two big cities taking steps to stabilize the property markets and attract more home buyers.
Markets show signs of slowing after new economic data, with focus on Friday's jobs report and the possibility of a pause on rate increases. Oil prices are impacted by Chinese factory activity and expectations of supply cuts.
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.
The slowdown in China's property market continues despite government measures to revive the economy, with analysts warning that the sentiment among many Chinese is too weak for these moves to be effective.
China's economy is facing numerous challenges, including high youth unemployment, real estate sector losses, sluggish growth in banks, shrinking manufacturing activity, and lack of investor confidence, indicating deeper systemic issues rather than cyclical ones.
China's economy is showing signs of slowing down, with indicators such as GDP growth, exports, consumer price index, youth unemployment, yuan depreciation, and a decrease in new loans pointing to potential trouble ahead.
China's economic growth has slowed but has not collapsed, and while there are concerns about financial risks and a potential property crisis, there are also bright spots such as the growth of the new energy and technology sectors that could boost the economy.
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.
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.
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.
China's property sector continues to struggle with deepening falls in new home prices, property investment, and sales in August, despite recent support measures, adding pressure to the country's economy.
China's retail sales and industrial production exceeded expectations in August, with retail sales growing by 4.6% and industrial production growing by 4.5%, but fixed asset investment lagging behind at 3.2%, indicating potential instability in the external environment.
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.
Despite prevailing negativity regarding China's economy, alternative high-frequency data points, such as subway ridership and commodity prices, suggest that many parts of the economy are functioning well, although the real estate sector is still struggling.
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 showing strength in consumer spending and manufacturing activity boosted Asian markets, with Hong Kong's Hang Seng Index rising 0.8% and Tokyo's Nikkei 225 surging 1.1%, despite concerns about a slowdown in China's economy.
Signs of improvement in China's economy, such as improving credit demand and easing deflationary pressures, may not be enough to stabilize the economy due to bigger concerns of decreasing affordability, tight wages, and rising costs that have not been addressed. A comprehensive policy revamp may be necessary for China's economy to recover.
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 urbanization drive is slowing down, which is expected to further impact the struggling property sector that has been plagued by debt problems and declining consumer confidence. Managing the excess housing supply and diversifying the economy away from reliance on the property sector are crucial for a healthier Chinese economy.
China's economic outlook, particularly for the real estate sector, is expected to become clearer in the last three months of the year, with potential government support and loosening of restrictions to stabilize the housing market and allow the economy to recover fully by mid-2024. However, economists predict that real estate growth will remain weak and prices may fall gradually, as significant price declines could have adverse social consequences.
China's economy is showing signs of a stronger recovery, with indicators such as increased activity around shopping malls, a pickup in cement manufacturing, and a surge in traffic congestion, suggesting renewed consumer confidence and a positive direction for the construction sector.
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.