People in Hong Kong dining at a dim sum restaurant.China News Service/Getty Images
Disinflationary trends in the US are taking hold partly because of China’s weakening economy, according to Ed Yardeni.
Yardeni said on Thursday that the US could continue to see lower inflation without a recession.
China’s aging demographic profile and weak consumer spending is disinflationary for the US, Yardeni said.
If the US manages to get inflation back down to the Federal Reserve’s long-term target of 2% without triggering a recession, it might have to partly thank China, according to market veteran Ed Yardeni.
Yardeni highlighted in a Thursday note to clients that certain economic forces in China are having a disinflationary impact on the US, and that could ultimately pave the way for a soft landing in the US economy.
“Something is definitely wrong with China’s economy,” Yardeni said, alluding to the fact that months after the Chinese government lifted its strict COVID-19 lockdown measures, its economy hasn’t picked up accordingly.
That has flipped the economic narrative on its head, as many economists had expected at the start of this year that a reopening of China’s economy would help lift the global economy while also putting upside pressure on inflation.
But Chinese exports fell in June and the country’s imports have remained flat since mid-2021, Yardeni highlighted, and that’s leading to lower prices for goods.
“Confirming the weakness in China’s economy is that the country’s PPI fell 5.4% year-over-year through June, while the CPI was unchanged over the same period,” Yardeni said. “China’s PPI inflation rate tends to be a leading indicator for the US PPI for finished goods, which fell 2.8% year-over-year in June.”
China’sweak economy is exporting disinflationary trends to other countries, and that’s a welcome sign for the US Fed, which was likely encouraged by the Wednesday release of the June CPI report, which showed the lowest inflation levels in more than two years. The Producer Price Index for the month released on Thursday was also lower, solidifying the disinflation narrative.
“China’s economy has been weakened by the bursting of its property bubble. Its rapidly aging demographic profile is also weighing on consumer spending as China is becoming the world’s largest nursing home. This is all deflationary for China and disinflationary for the US,” Yardeni explained.
“Bottom line: Inflation can come down in the US without a recession in the US!” Yardeni said.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
