NY Fed Survey Finds Inflation Expectations Rise, Spending Plans Drop
(…) the New York Fed said that households have a mixed view on future income and earnings, and are expecting lower spending over time. In November, median one-year ahead expected earnings gains ticked down 0.1 percentage point to 2.2%, while median expected household income growth ticked up to 2.9%, from 2.8% in October.
Expected spending fell “sharply” to 2.8% in November, from an expected 3.3% rise the prior month. November’s reading was the lowest since September 2017 and the New York Fed said “the decline was broad based across age, income and education groups.” (…)
Three years from now, households see inflation at 2.5%, from 2.4% in October, while one year from now, those surveyed see inflation at 2.4%, little changed from the prior month.
China’s Declining Car Sales Sputter Into 17th Month
Auto sales fell 3.6% last month from a year earlier to 2.46 million vehicles, the government-backed China Association of Automobile Manufacturers said Tuesday. It marked a slight improvement from October’s 4.0% year-over-year drop. (…)
Through the first 11 months of the year, the combined market share for American companies—most notably Ford Motor Co. and General Motors Co. —shrank by 1.5 percentage points, while those of German and Japanese car makers grew, CAAM data showed. Chinese auto makers’ combined share fell 3 percentage points during the same period.
Chen Shihua, deputy secretary-general of the auto industry association, said the recent easing in the pace of the sales decline is a sign that car makers have been able to adjust their production to meet a tougher emissions standard that was introduced in many areas across the country in July.
The shift to the new standard was a messy transition for auto manufacturers and caused confusion for dealers, many of whom tried to sell off vehicles that didn’t meet the new standards. (…)
Another factor behind the continued decline is weak sales of new-energy vehicles, a category that includes electric cars, after the government halted most subsidies at the end of June. Sales of new-energy vehicles dropped for the fifth consecutive month, by 43.7% to 95,000 vehicles, in November.
While January-November new energy vehicle sales rose 1.3% from the same period last year, CAAM’s Mr. Chen said full-year sales are likely to be lower compared with 2018. (…)
China November CPI peaking Inflation in China in November rose further to 4.5%YoY, but there are clear signs that it is peaking
Newswires running headlines like “China November inflation highest since 2012” entirely miss the point. Inflation in China has been driven higher by rising pork and consequently other meat prices. This is fallout from the African Swine Fever (AFS) epidemic that has killed half of the hog population in China.
In November, pork prices rose 3.8% MoM. But this was way down from the 20.1% increase in October, the 19.7%MoM increase in September, and the 23.1% increase in August. In fact, it was the lowest increase since June (3.6%MoM).
The reasons for this moderation are various but include:
- Higher pork imports, including from the US alleviating supply shortages
- Mobilisation of the strategic pork reserves (frozen pork warehoused for emergencies)
- A decrease in new reports of African Swine Fever (AFS) and rebuild of stocks
(…) the peak of the AFS pandemic has passed. Pork prices may even start to decline next month, and in the coming months, dragging down other meat prices along the way. Inflation rates should now have peaked, and the coming months will see measured inflation drop steadily.
More than that, household spending will get a lift from the additional purchasing power following the decline in meat prices, which will provide a broader lift to the domestic economy at a difficult time for the economy.
There are no specific policy implications from this. The improvement in purchasing power reduces the urgency of additional supportive fiscal measures, and the People’s Bank of China was, in any case, looking through this food price spike in terms of its monetary policy settings, so it does not need to shift its stance.
Possibly, the improvement in China’s domestic food situation reduces the incentive to give more ground in trade talks with the US, especially in terms of commitments to buy agricultural produce. Though there may be broader reasons for making concessions to secure tariff rollbacks. (…)
Congress Wants to Ban Chinese Buses, Railcars in Defense Bill Congress is taking aim at China in a must-pass defense-policy bill at the same time that the Trump administration is seeking to negotiate an interim trade pact with Beijing.
House and Senate Republicans and Democrats have reached agreement on language in the National Defense Authorization Act that would bar the use of federal funds to buy Chinese buses and railcars, congressional aides familiar with the matter told The Wall Street Journal, adding that the ban excludes pre-existing contracts.
The legislation would affect the U.S. subsidiaries of two Chinese companies. One is China’s state-owned CRRC Corp. , which has been making significant inroads into the U.S. market for railcars, estimated at $18 billion annually. The other is BYD Co. , a Chinese company that sells electric buses for the U.S. market through unit BYD Motors LLC.
The U.S. electric-bus market is expected to grow from $745 million in 2018 to about $1.95 billion in 2024, according to Prescient & Strategic Intelligence Pvt. Ltd., a market-research and consulting firm. (…)
The companies have previously warned that a ban is unfair and would hurt U.S. workers at their factories in California, Illinois and Massachusetts. (…)
“It’s absolutely clear that the Chinese government has a strategic and tactical plan to dominate the rail and transit industry—both rail and bus—and have executed that in Australia and are clearly in the process of executing that in the United States,” Mr. Garamendi said. (…)
Lawmakers also are poised to ban the U.S. military from buying Chinese drones as U.S. officials grow worried the Chinese devices may be spying on Americans and putting critical U.S. infrastructure at risk. (…)
The defense bill also would prohibit the removal until certain conditions are met of Chinese telecom giant Huawei Technologies Co. from an export blacklist kept by the Commerce Department. (…)
The bill contains a number of other China-related provisions, including one intended to reduce reliance on foreign sources of rare-earth minerals, another that requires reports on Chinese military activities in the Arctic and Chinese foreign direct investment in the Arctic, and another that creates new reporting requirements for national security academic research.
Additional language supports improving Taiwan’s defense capabilities by expanding joint training, foreign military sales, and senior level military-to- military engagements. And the legislation would order the Secretary of Defense to review Chinese military, economic, information, diplomatic, and digital influences in Taiwan.
Drowning in uncertainty: Trade questions slow investment, squeeze profits across U.S.
Real world impact from Reuters. The smaller, the worse.
Banana Hanging on a Wall Sells for $120,000 at Miami Basel Art Fair
(…) Artist provocateur Maurizio Cattelan, maker of the golden toilet that was stolen in September, has done it again. This time, by attaching a banana from a local grocery store to a wall of Galerie Perrotin’s booth. The asking price: $120,000.
Incredibly, this happened last Friday at the White House: