Today: Oil prices tumble, French economy stagnates.
IEA Numbers Pile On to Prices It’s hard to look beyond oil prices as the main news for the energy sector again on Thursday, with yet more forecasts of declining demand growth.
Once again, the IEA has cut its estimate for oil demand growth for this year and next, saying the recent demand slowdown is “nothing short of remarkable.” (…) The IEA said Saudi output fell by 330,000 barrels of oil per day in August.
China Inflation Stays Subdued as Producer Prices Extend Decline China’s consumer inflation eased to a four-month low in August while factory-gate prices extended their decline to 30 months, adding room for government stimulus to support the economy amid a property slump.
The consumer price index rose 2 percent from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.2 percent median estimate in a Bloomberg News survey and 2.3 percent in July. The producer price index fell 1.2 percent, compared with projections for a 1.1 percent drop.
China’s central bank is set to withdraw cash from the financial system this week for the first time since early August, reflecting concerns about accelerating inflows of speculative funds.
The move followed the yuan’s surprisingly strong gains in recent days and Chinese Premier Li Keqiang‘s repeated pledge to advance structural reforms and avoid relying on overly strong economic stimulus measures.
Speculative capital from overseas, known as hot money, has been drawn to China by a strong yuan and Beijing’s reluctance to use lower interest rates or other forms of aggressive monetary-policy easing to counter a slowing economy. Hot money inflates prices for property and other assets, and adds to risks in the nation’s banking system.
The People’s Bank of China will drain a net five billion yuan ($814 million) from the money market this week, traders participating in the operation said Thursday.
The PBOC previously withdrew funds from the market in the week of Aug. 3, draining a net 20 billion yuan. The PBOC injected a net seven billion yuan last week. (…)
The French economy continued to stagnate in the second quarter of 2014, signalling an on-going lack of growth in the euro area’s second-largest member state. The data was accompanied by the French finance ministry slashing their 2014 growth forecast from 1.0% to 0.5%. However, a poor start to the third quarter suggests that even this lowered estimate may prove optimistic.
Right on cue today:
France Drops Growth Outlook France lowered its growth forecast again and warned it will need more time to bring its public deficit in line with European Union rules.
Finance Minister Michel Sapin said the French economy would grow just 0.4% in 2014, compared with the 0.5% growth forecast issued only a few weeks ago. In 2015, France’s economy will grow 1%, versus the government’s previous forecast of 1.7%, he said on Wednesday.
France will also have to push back its plans to get its budget deficit within 3% of economic output by another two years to 2017, he said, the latest sign of the economic challenges the French government faces.
Instead, Mr. Sapin projected France’s public deficit would stand at 4.4% of gross domestic product in 2014, rather than falling to 3.8%, as the government had previously projected. Spending cuts in 2015 should help the government cut the public deficit to 4.3% next year, and below 3% in 2017, he said. (…)
“We are not asking for any change in European rules, we are not asking for any suspension, or for any exception to be made for France or any country,” said Mr. Sapin. “We are asking for everyone to take into account the economic reality, growth that is too weak and inflation that is too low.” (…)