Daily update
Daily update
- China’s July consumer price inflation rate turned negative, joining producer prices in deflation (in year-over-year terms). On official numbers, China ranks behind the US and ahead of the EU in terms of size. Why does China’s deflation not matter more to the rest of the world?
- Any country’s consumer price inflation is a local affair. The biggest part of consumer prices are domestic labor costs. Countries have different items with different weights in their consumer price calculations—so what drives inflation in one country may be of little importance in another. While producer prices might be assumed to influence China’s export prices, the relationship is loose—and China’s export prices have a limited relationship to consumer prices in other countries (US labor generally gets most of the price a US consumer pays for a Chinese import).
- US banks reported an increase in losses on lending in the second quarter. The rise means losses are now more normal, stressing the “landing” part of the soft landing. It suggests that the availability of savings is now more limited. This is more likely to affect lower income households, who have less spending power.
- The calendar is otherwise quiet today, as markets brace for US consumer price data released tomorrow.
