Tag Archives: China

Redbook retail sales, Inflation adjustment, China, House prices, Consumer confidence

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Still depressed
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Lower than the Fed thought:

U.S. inflation probably lower than reported, Fed study says

Aug 24 (Reuters) — U.S. inflation in the first half of the year was probably “markedly lower” than reported according to the San Francisco Federal Reserve Bank. Researchers at the regional Fed bank had earlier found that the very weak readings for economic growth in the early part of the year were likely due to inadequate adjustments for seasonal fluctuations. The same researchers applied similar methodology to inflation data and found that core PCE inflation was probably overstated by 0.3 and 0.2 percentage points in the first two quarters of the year, respectively.

This does nothing for output and employment:

China’s central bank pumps in billions to ease liquidity strain

Aug 25 (Xinhua) — The People’s Bank of China (PBOC) conducted 150 billion yuan (23.4 billion U.S. dollars) of seven-day reverse repurchase agreements (repo). The reverse repo was priced to yield 2.5 percent, unchanged from the yield on a net injection last week of 150 billion yuan using reverse repos, according to a PBOC’s statement. The PBOC also channelled another 110 billion yuan via its medium-term lending facility. Despite the cash injection the benchmark overnight Shanghai Interbank Offered Rate (Shibor) climbed by 1.3 basis points to 1.879 percent.

Not a good sign:

S&P Case-Shiller HPI
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Highlights
Inventories may be low and sales rates firm, but both Case-Shiller and FHFA are pointing to a surprising flat spot for home-price appreciation. Case-Shiller’s 20-city adjusted index fell 0.1 percent in June vs Econoday expectations for a 0.1 percent rise. Year-on-year, 20-city prices, whether adjusted or unadjusted, are unchanged at plus 5.0 percent. This rate has been inching higher but looks like it may be ready to fall back unless prices pick up.
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A bit less than expected and still at very depressed levels:

New Home Sales
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Settled back to depressed levels from last month’s blip up:

Richmond Fed Manufacturing Index
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Consumer confidence bounced up with lower gas prices, as it’s one man one vote, not one dollar one vote, and so hasn’t been a reliable indicator of retail sales.
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China News

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Reads to me like policy is moving back towards growth and ‘inflation?’

I don’t expect runaway inflation but enough to continue to fundamentally continue to weaken the currency.

China’s currency has been fundamentally weakened for the last couple of years, while being supported vs the dollar by foreign investment, speculation, and what looks to me like the indirect expenditure of dollar reserves. Should the currency starts falling against the dollar it will tell me those factors have run their course.

Hu Pledges More China Imports as IMF’s Zhu Sees ‘Soft Landing’
China’s Stocks Rise Most in 3 Weeks on Bank Loans, CPI Outlook
China’s Hu pushes for larger global role
Obama warns Hu of U.S. frustrations on trade
Major yuan rise no cure for U.S. economic ills-China’s Hu
China’s Imports Rise Sharply, While Export Growth Slows
China New Loans Rise More Than Expected in Loosening Signal
Former China Banking Regulator Says China 2011 Growth Above 9%
China’s economy on right track: IMF
IMF See Little Decrease in Incentives for Saving in China
Former PBOC Adviser: China’s Economy May Grow 8%-8.5% Annually Over Next 10 Years – Report
China’s Property Market Experiencing ‘Soft Landing’, Fan Says

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Forbes – Property Prices Collapse in China. Is This a Crash?

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Reads like the inflation problem was worse then most thought, and that a hard landing might still actually be happening. No way to actually tell in real time.

With China a first half/second half story, as previously discussed, January will bring a fresh slug of new govt. lending/spending that should at least moderate any fall that’s in progress.

However, if the anti inflation fiscal policies continue, and spending/lending is materially down from last year, the weakness should persist and potentially get a lot worse.

Property Prices Collapse in China. Is This a Crash?

By Gordon Chang

November 6 (Forbes) — Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun,” said Alan Chiang Sheung-lai of property consultant DTZ to the South China Morning Post.

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Credit spillovers from Eur banks to EM

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Makes sense.

I always wondered how that loan demand was accommodated.
Never looked like the kind of lending US regulators would sanction.


Karim writes:

Interesting table from JPM.
Much larger dependence on credit from Eur banks for LATAM economies than from U.S. banks.
Poland/Russia not as surprising but still large!
Overall, domestic bank lending surveys in EM have also been moving towards a net tightening of lending standards.

Could be more severe credit contraction in those economies as a result of ongoing strains in Europe.

Euro area and US bank claims on EM
As of 2Q11
EUR Banks
US Banks
$ bn
% of dom cred
$ bn
% of dom cred
EM
1980.7
12.4
811.3
5.1
EM Asia
406.7
3.2
472.0
3.8
China
90.6
1.0
81.7
0.9
Korea
68.4
6.3
95.1
8.8
Latam
618.1
38.7
248.5
15.6
Brazil
285.0
23.1
97.6
7.9
Russia
113.5
16.1
23.8
3.4
Poland
249.0
95.6
14.4
5.5


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Euro Bailout Fund Chief Sees No Quick China Deal

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Now it all starts unraveling. It’s all talk- another ‘optical illusion’ with no operational reality I sight. The China participation isn’t a done deal. The 50% haircut isn’t a done deal either as they haven’t yet figured out how to actually do it without a default event. The EFSF contributions aren’t a done deal either.

What they have done is further frightened investors to the point where the ECB will find itself buying a lot more bonds to keep member nation funding in check, while ‘negotiations’ drag on with no resolution, meaning, as previously discussed, this is the resolution.

Hoping i’m wrong…

Euro Bailout Fund Chief Sees No Quick China Deal

By Reuters

October 28 (CNBC) — The head of Europe’s bailout fund said on Friday he does not expect to reach a conclusive deal with Chinese leaders during a visit to Beijing but expects the surplus-rich country to continue buying bonds issued by the fund.

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Crude Oil Update

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Still seems to me that the idea that WTI appreciates to Brent as the Strategic Petroleum Reserve release winds down over the next few weeks is playing out as previously discussed. The WTI discount depends on a serious glut condition persisting, and the wind down of the approx 3.8 million barrels a week being delivered from the strategic petroleum reserve will work to reduce the glut by that amount.

If so, WTI is marching towards $110/barrel which seems to me could trigger substantial market reactions.

And about the same time the super committee deficit reduction talks will be in full swing, euro financing stresses elevated, exacerbated by confirmation of the 0 gdp growth forecasts hit the headlines, and further slowdown news from China complicating things as well.

The ‘answer’ remains as simple as it is further away from political reality than ever, even though the right policy responses couldn’t be more attractive to both sides:

The US budget deficit is too small.

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Shanghai New Home Sales Plunge 77% Y/y to 6-Year Low

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This doesn’t need to mean hard landing, but it means the state has to be that much more countercyclical to hold it all together, and they are facing what they consider a serious inflation problem.

Shanghai New Home Sales Plunge 77% Y/y to 6-Year Low, Uwin Says

Oct. 10 (Bloomberg) — Transactions fell to 85,400 square meters in the week ended Oct. 9, fall of 40% w/w, property consultant Shanghai Uwin Real Estate Information Services Co. says in e-mail statement today.

* New home sales in week of Oct. 9 28% lower than same period during 2008 financial crisis, Uwin chief analyst Zhijian Huang says
* New home supplies slumped 81% w/w in week of Oct.9
* Traditional “golden” September turns weakest month for home sales this year excl. Feb. and Mar.: Huang
* Situation to be more negative for developers should they continue to resist price cuts, and cuts may shift to plunging from gradually falling: Huang

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China Extends Crackdown on Off-Balance-Sheet Loans

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Cutbacks now will further slow things:

China Extends Crackdown on Off-Balance-Sheet Loans

July 4 (Reuters) — China’s bank regulator has cracked down on off-balance-sheet lending by the country’s banks, sources told Reuters on Monday, its latest step to prevent over-zealous and risky lending from hurting its financial system.

China Banking Regulatory Commission (CBRC) has ordered banks to check all their deals in discounted commercial bills after discovering misconduct among some banks, two sources said.

Chinese banks have in the past year taken to off-balance-sheet lending, or keeping loans outside balance sheets after authorities clamped down on bank loans as part of their fight against inflation.

Last week the regulator tightened control on sales of wealth management products to ward off potential risks, and the regulator had earlier told banks to include all their loans extended via trust investment programs into their account books.

Discounted bills, an important source of financing for firms with no access to formal bank loans, accounted for about 2.5 percent of the 49.5 trillion yuan ($7.7 trillion) of total outstanding loans at the end of March, according to data from the Chinese central bank.

The regulator’s latest move comes after discovering that some rural credit cooperatives and banks in the central Henan province were issuing loans through discounted commercial bills and keeping them outside their loan books.

Under China’s banking laws, banks’ deals in discounted commercial bills should be reflected on their balance sheets.

Banks have been asked to investigate all deals linked to discounted commercial bills and submit their findings by Monday, sources said.

Under the review, banks were ordered to verify that bills issued were based on real transactions, and were ordered to track how extended credit was spent, they added.

Banks were also instructed to stop discounting bills that they issued to get funds for property and stock investments.

Analysts welcomed the move towards stringent regulation, which would also boost transparency.

“There is some concern that some borrowers were using these discounted bills as collateral for further borrowing,” said Mike Werner, a China banking analyst with Sanford Bernstein.

“So the idea that the CBRC is going to increase diligence covering this area of the market is not surprising.”

The regulator said bank branches found with serious misconduct would be barred from the discounted commercial bill market entirely, the sources added.

CBRC was not immediately available for comment when contacted by Reuters.

As China tightens policy and rein in lending to tame 34-month high inflation of 5.5 percent, many companies are struggling to get loans.

For these firms, discounted commercial bills are an important source of financing. They let companies bring bills or drafts to banks and request for money to be disbursed before they mature.

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Modern Monetary Theory: The Last Progressive Left Standing

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Modern Monetary Theory: The Last Progressive Left Standing

By Warren Mosler

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China’s New Missile May Create a ‘No-Go Zone’ for U.S. Fleet

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[Skip to the end]

I suspect this is what Iran is developing as well to drive the US Navy out of the Gulf region.

China’s New Missile May Create a ‘No-Go Zone’ for U.S. Fleet

By Tony Capaccio

Nov. 17 (Bloomberg) — China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence.

The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported.

Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near China. Their mission includes defending Taiwan should China seek to exercise by force its claim to the island democracy, which it considers a breakaway province.

The missile could turn this region into a “no-go zone” for U.S. carriers, saidAndrew Krepinevich, president of the Center for Strategic and Budget Assessments in Washington.


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