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China’s Economy Slows in October as Business Confidence Slumps

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(Bloomberg) — China’s economy slowed in October as car and real-estate sales weakened and global trade and small business confidence contracted, signaling last month’s pickup in activity wasn’t enough to change the country’s grim economic picture.

That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge was at 4, indicating a dropoff in momentum after three months of improvement.

Small business confidence fell back into contraction this month for the first time since May, when Shanghai and other cities were at the height of lockdowns. The expectation index slowed and almost every other indicator on conditions for smaller companies was negative, according to a survey of more than 500 firms by Standard Chartered Plc economists.

While export orders rose, a contraction at domestically focused companies implied weaker demand in China, the economists wrote. An indicator for the manufacturing sector dropped to its lowest level since February 2020, while the index for accommodation and catering was at the lowest level since at least May 2020, underlining how Covid Zero restrictions on movement and travel are weighing on the economy.

“Both manufacturing and services performance sub-indices dipped into contractionary territory,” wrote economists Hunter Chan and Ding Shuang. “Covid resurgence and weaker demand were likely drags,” they wrote. The National Day holiday period also didn’t appear to boost spending much, with the economists calling its effect “insignificant.”

Daily Covid case numbers in China have been hovering around 1,000 since early August, despite strengthened efforts to contain outbreaks and much tighter restrictions on travel and movement ahead of the just-ended Communist Party congress. Those controls have stopped exponential increases in cases at the expense of private consumption, which only grew 2.5% in September from a year earlier.

There was no indication from the party congress that the government is planning any changes to the Covid Zero strategy, adding to a stock market rout Monday that was the steepest since 2008. That drop reversed course somewhat on Tuesday, though the benchmark onshore share index has still lost more than a quarter of its value this year.

The epic selloff, though, was almost completely ignored by Chinese state media, which instead dedicated the bulk of their front pages to official news articles about President Xi Jinping. News and discussion on social media was also censored.

The Securities Times, which is managed by the Communist Party, ran a report on how the housing market might recover this quarter from its more than year-long contraction.

Despite that optimism, housing sales in the four biggest cities in China were down almost 30% in the first three weeks of the month compared to a year earlier, and property transactions slumped almost 40% during the long holiday earlier in the month, which is usually a time of brisk sales.

The housing market slump has slashed demand for all sorts of commodities used in construction, including steel and cement. While stocks of steel rebar have continued to fall, total steel inventories at mills rose this month, while daily crude steel output fell from earlier in October. That’s caused the price of iron ore to drop to the lowest since November. The prices of other metals have also fallen in recent months on dimming prospects for global growth.

Early Indicators

Bloomberg Economics generates the overall activity reading by aggregating a three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices.

  • Major onshore stocks – CSI 300 index of A-share stocks listed in Shanghai or Shenzhen (through market close on 25th of the month).
  • Total floor area of home sales in China’s four Tier-1 cities (Beijing, Shanghai, Guangzhou and Shenzhen).
  • Inventory of steel rebar, used for reinforcing in construction (in 10,000 metric tons). Falling inventory is a sign of rising demand.
  • Copper prices – Spot price for refined copper in Shanghai market (yuan/metric ton).
  • South Korean exports – South Korean exports in the first 20 days of each month (year-on-year change).
  • Factory inflation tracker – Bloomberg Economics-created tracker for Chinese producer prices (year-on-year change).
  • Small and medium-sized business confidence – Survey of companies conducted by Standard Chartered.
  • Passenger car sales – Monthly result calculated from the weekly average sales data released by the China Passenger Car Association.

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Theo Argitis: Taking stock of Canada’s complicated economy before tomorrow’s Bank of Canada decision – The Hub

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Theo Argitis: Taking stock of Canada’s complicated economy before tomorrow’s Bank of Canada decision  The Hub

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Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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