The Wall Street Journal pointed out that “China’s economy appears to have escaped a damaging round of consumer deflation, at least for now.” On the margins, things are looking up. But the bad news is that this is all based on a very low base period, and the Chinese government needs to take more measures to support the real estate market.
Mainland China’s National Bureau of Statistics has emphasized many times this year that there is no deflation in China’s economy at present or in the next stage. At a press conference last week, Mainland China’s National Bureau of Statistics stated that the CPI increase is expected to continue to rebound, and the narrowing PPI decline is expected to continue.
The “Wall Street Journal” reported that after experiencing severe June and July, mainland China’s main economic data for August released last Friday showed clear signs of improvement: consumption and industrial growth exceeded expectations, and officials said employment also increased. has improved. But in the key housing market, house prices in third- and fourth-tier cities have accelerated their decline, following a prolonged downturn.
The report mentioned that all this makes the possibility of long-term decline in consumer prices less likely, which may plunge China into a vicious cycle of falling prices and excessive consumer frugality similar to what Japan experienced in the 1990s. Mainland consumers remain very cautious and savings levels still appear to be much higher than before the epidemic, but the situation has improved significantly in recent weeks.
Notably, job seekers in the service sector appear to be having better luck. The services industry is the largest sector in the Chinese economy. The employment sub-index of the services PMI (Purchasing Managers Index) fell sharply this spring in parallel with construction employment, but has now begun to recover, although it is still below the boom-bust line. Some high-frequency indicators of consumer activity, including traffic congestion in major cities, also began to rebound in late summer, according to Goldman Sachs.