Retail sales of cars, sport utility and multipurpose vehicles climbed 23 percent to 1.6 million units in July, the biggest monthly percentage gain since February 2015, according to the China Passenger Car Association. Deliveries increased to 12.4 million units in the seven months through July.
Dealers offered discounts on models such as the Audi A4 of about 18 percent to help reduce stockpiles, according to Jochen Siebert, managing director of JSC Automotive Consulting. A gauge of inventory levels fell to an 11-month low and indicated contraction for the first time in that span, the China Automobile Dealer Association said. Keeping supplies in check is typically an indication carmakers can maintain pricing and production.
(…) SUVs sales grew 45 percent in July, outpacing the 15 percent expansion for sedan models. (…)
China’s industrial producer price index fell by 1.7 per cent in the year to July, government statistics showed on Tuesday, a relief compared with a 2.6 per cent pace the previous month and lows of 6 per cent deflation in the second half of last year. (…)
It said the improvement in industrial deflation in Tuesday’s data compared with the previous month was largely the result of a rebound in prices of metal mining and processing, including steel. The prices of petroleum and natural gas extraction, and of coal mining, continued to rise.
China’s consumer price index continued to rise, with inflation at 1.8 per cent in the year to July, according to Tuesday’s data.
The continuing inflation faced by Chinese consumers, including in imported goods, was largely the result of high food prices. This year’s sky-high pork prices accounted for 0.42 percentage points of the rise in the headline figure, according to the National Bureau of Statistics. In addition, the prices of services such as education, leisure and medical care are rising.
Are Negative Rates Backfiring? Here’s Some Early Evidence The European Central Bank hoped that negative interest rates would encourage consumers and businesses to spend more, but many are saving instead.
Policy makers in Europe and Japan have turned to negative rates for the same reason—to stimulate their lackluster economies. Yet the results have left some economists scratching their heads. Instead of opening their wallets, many consumers and businesses are squirreling away more money. (…)
Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries. Companies in Europe, the Middle East, Africa and Japan also are holding on to more cash. (…)
Some economists now believe negative rates can have an unintended psychological effect by communicating fear over the growth outlook and the central bank’s ability to manage it.
Unintended but nonetheless pretty sensible. Economists often fail to understand how ordinary people actually live and think. If you are retired and living off your life savings, low interest rates, let alone negative rates, have a direct effect on your monthly income. Since people live much longer, lower for longer is scary and immediately forces a change in spending patterns.
Workers aged 55 and over, dreaming of their retired life, also get scared by lower for longer. They MUST increase their savings.
Younger workers must be wondering how all those old age pensions will be able to get paid with lower for longer. How can pension funds meet their obligations if they can only invest at 1-2%. In Europe, some 70% of the bond market trades on negative yields! Somebody will have to foot this pension bill some day.
From lower for longer, here’s higher for shorter:
New Rules and Fresh Headaches for Short-Term Borrowers A move by the SEC to make money-market funds safer is putting stress on a crucial funding source for cities, counties and foreign banks.
(…) Rates on short-term loans between banks have risen to the highest levels in seven years.
The common thread: a move by the Securities and Exchange Commission to make money-market funds safer in the wake of the financial crisis.
The regulatory changes are giving investors a reason to flee the $2.7 trillion U.S. money market, putting unintended stress on a crucial funding source for cities, counties and foreign banks.
“You could see $400 billion move out of the private credit markets,” said John Tobin,head of global liquidity portfolio management at J.P. Morgan Chase & Co.’s asset-management arm. “That has implications.”
Money-market funds typically buy short-term corporate and municipal debt, acting as a place for companies, pension funds and insurance firms to park cash at a little better rate than a savings account. The money is used for purposes such as bridge loans for municipalities awaiting tax revenue or cash to pay bills for seasonal businesses.
The new rules don’t come into effect until Oct. 14, but already they are having an impact. Funds worried about outflows are sitting on cash and are reluctant to buy debt that matures after the October deadline.
The rules require prime funds, which typically invest in debt issued by highly rated corporations, and tax-exempt funds that invest in municipal debt to abandon implied guarantees that institutional investors will get their money back and allow the funds to suspend redemptions temporarily in a crisis.
Corporate treasurers that invest in money-market funds and others who can’t afford the risk of losing access to their money find the rules burdensome. The rule changes won’t apply to funds that invest only in the debt issued by the federal government or government-controlled entities such as Fannie Mae and Freddie Mac. (…)
Assets held by prime money-market funds dropped below $1 trillion at the end of July for the first time in 17 years and have fallen by more than a quarter of a trillion dollars since mid-March, according to the Investment Company Institute. (…)
The rules are aimed at preventing the sort of chaos that hit the money market after Lehman Brothers Holdings Inc.’s bankruptcy during the financial crisis. The goal is to increase transparency and contain the fallout that could result from many investors cashing out at once, the SEC wrote in the final rule. (…)
Anticipation of the new rules already has pushed up the London interbank offered rate, or Libor, to the highest levels since May 2009. The rate reflects the cost of borrowing among banks and is a benchmark for other debt like corporate loans and mortgages.
Financial companies’ borrowing rates have jumped in the commercial-paper market as well. As of Aug. 4, those companies were paying 0.9% on average to borrow for 90 days, according to data from the Federal Reserve, up from 0.7% a week earlier and the highest level since February 2009. (…)
The SEC has said it had anticipated increases in borrowing rates when it passed the rule in 2014, but felt the trade-off was worth it to avoid a repeat of 2008. (…)