“Severe deflation pressures are rippling across the country,” said Alistair Thornton and Xianfeng Ren from IHS Global Insight. “Deflation, not inflation, is the greatest short-term threat to the Chinese economy.”
“The hard landing has happened,” said Charles Dumas from Lombard Street Research. “We don’t believe official data. We think GDP slowed to a 1pc rate in the second quarter.”
A blizzard of weak data has caught policy-makers off guard, though shares rallied in Shanghai on hopes for monetary loosening fromChina’s central bank after consumer price inflation (CPI) fell to 1.8pc.
New property starts fell 27pc in July. Industrial output growth fell to 9.2pc for a year ago but has been flat over recent months.
“This was the moment when stimulus was supposed to bite. It didn’t,” said Global Insight. Critics say Beijing let the property boom go too far and then hit the brakes too hard last year. Monetary tightening led to a contraction in real M1 money. The delayed effects kicked in this year just as Europe fell back into recession and the US slowed abruptly. (full article here).
The slowmotion fall of the “perfect” economy should receive more attention. From Macrobusiness.
A recent staff report by the International Monetary Fund (IMF) shows an estimate of capacity utilisation in China. Interestingly, according to IMF’s estimation, China has been operating below capacity (albeit not unreasonably) even at the peak right before the 2008/09 financial crisis, and that was supported by external demand which no longer quite exists now. China has built even more capacity since then, which is able to serve the demand from a global economy does not exist. Capacity utilisation has dropped from about 80% before the crisis to a mere 60% in 2011. That compares with about 78.9% for the US currently for total industry (which is not very high by US’s historical average), and 66.8% at the financial crisis trough according to the Federal Reserve. In other words, current capacity utilisation in China appears to be even lower than that of the US during the 2008/09 financial crisis. (Full artcle here).
The French elections are approaching fast. While the main focus has been on Greece, Italy and SPain, let’s review some facts on France. From Scott Barber of Reuters.
The results of this past weekend’s first round of voting in the French presidential elections may have delivered a warning that the close alliance between France and Germany on strategies for tackling and containing the eurozone crisis may be approaching an end. For the last few years, the team of German Chancellor Angela Merkel and French President Nicolas Sarkozy has been so much in sync that they have become known to all as “Merkozy”. But in first-round voting, Sarkozy became the first French president in half a century to fail to emerge as leader, ceding pride of place to Socialist rival Francois Hollande.
Now the two men will square off in a runoff election scheduled to take place May 6, and it is the one-third of French voters who cast ballots in favor of other parties – including the National Front candidate on the extreme right, Martine Le Pen – who hold the balance of power. To understand the impact of these voters on the outcome, see the interactive graphic, below, which enables you to calculate how many voters who supported candidates that didn’t make it through to the run-off now need to switch their allegiance to Sarkozy in order for him to cling on to his job.
Guest post for all the gold bugs, by World Complex. Gold is still the most important non fuel mineral in the world, irrespective if trading at 1, 2 or 3k…..
Perhaps you haven’t noticed, but at The World Complex, we like gold. A lot. Not too long ago we ran an article about historical gold production, with some estimates of future production for gold. Today we will take a closer look.
It turns out that my main professional activity is exploring for gold, and yet that isn’t why I spend so much time thinking about it.
I began this blog to investigate application of mathematical methodology to geologic problems. Over the last year in particular, I have put increasing effort into using the same tools to look at economic problems. Yet ask geologists why they spend so much time looking for gold, and you will get many answers, none of them true.
In terms of exploration effort, gold is the most important mineral on the planet. Approximately 50% of all money spent on non-fuel mineral exploration during the last fifteen years was spent on gold exploration.