KWEB - Weekend Commentary: Deflation And Inflation
2024-02-10 05:11:50 ET
Summary
- China's consumer prices fell last month at the fastest pace since the global financial crisis, piling pressure on the government to step-up support for a stumbling economic rebound that's roiling markets.
- Total New Loans of a record $684 billion were slightly ahead of January 2023 - and 9% ahead of estimates.
- Government bonds expanded $42 billion in January, down from December's $129 billion and January 2023's $57 billion.
A few headlines: WSJ: "Deflation Tightens Grip on China's Economy." FT: "China's Prices Fall at Fastest Rate in 15 years as Economy Battles Deflation." NYT: "China Deflation Alarms Raised by Falling Prices for Food and Cars."
February 7 - Bloomberg: "China's consumer prices fell last month at the fastest pace since the global financial crisis, piling pressure on the government to step-up support for a stumbling economic rebound that's roiling markets. The consumer price index dropped 0.8% in January from a year ago…, the weakest since September 2009. The drop was worse than economists' expectations for a 0.5% decline. 'The CPI data today shows China faces persistent deflationary pressure,' said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management Ltd. 'China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers.'"
Chinese Credit data belie all the deflation chatter. The first month of the year is always a big Credit month, with January 2024 especially big. Aggregate Financing (China's metric for system Credit growth) expanded a monthly record $904 billion, 8% ahead of January 2023 - and 16% above estimates. This puts three-month growth at $1.515 TN, 17% ahead of comparable 2023. And for the first time, 12-month growth in Aggregate Financing surpassed $5 TN ($5.017 TN), expanding 13.4%. It's worth noting that 12-month growth exceeded pre-pandemic comparable January 2020 by 39%.
Total New Loans of a record $684 billion were slightly ahead of January 2023 - and 9% ahead of estimates. Bank Loans expanded $3.163 TN, or 10.4%, over twelve months. Loans expanded 23.3% over two years, 37.5% over three and 73.8% over five years - in one of history's great Credit inflations.
Consumer (chiefly mortgage) Loan growth jumped to $136 billion, the strongest since last March, but below January 2023's $152 billion. Consumer Loans expanded $702 billion, or 6.6%, over the past year. One-year growth was almost 24% higher compared to January 2023, but a third lower than comparable January 2022.
Slowing somewhat, Corporate Loans continue to expand at a brisk pace. At $537 billion, January growth lagged the year-ago expansion by 17%. Yet Corporate Loans expanded $2.376 TN, or 12.0%, over the past year. Loans jumped 28.7% over two years, 43.5% over three and 78.2% over five years.
With banks lending like crazy during the month, Beijing pulled back on debt issuance. Government bonds expanded $42 billion in January, down from December's $129 billion and January 2023's $57 billion. Still, three-month growth of $330 billion was almost 60% ahead of the comparable year-ago increase. One-year growth of $1.319 TN was 37% ahead of comparable January 2023. Government Bonds expanded 15.7% over one year, 30.6% over two, 51.4% over three, and 82.1% over five years....
Weekend Commentary: Deflation And Inflation