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China housing market slowing further…..AP has a report out today discussing further slowing,
if not significant weakness, in the housing market in China. China reports that
housing sales declined 8% in the first quarter and unsold housing inventory
rose to a five-year high.
What’s the
point? The slowdown in the Chinese
economy has been a concern for investors for over a year now. Interestingly, it
this has not deterred a rise in the U.S. stock market but it remains a
lingering concern because of China’s growing global economic clout. The current
consensus thinking on China’s GDP growth is now slowing to a 6%-7% sustainable
rate, much lower than several years ago. The Chinese government is attempting
to slow the economy and credit expansion to avoid the risk of a bubble and
subsequent implosion of the economy. It remains to be seen if this can be
accomplished without inducing outright recession in China and this is what
concerns many investors today. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140613&id=17698427
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PPI flat ex food and energy……Labor Department today reports producer price index for May declined 0.2%, lower than expected,
and down from 0.6% rise in April. Excluding food and energy, the PPI was flat
in May, after a 0.3% rise in April.
What’s the
point? There is still a mixed
consensus on the outlook for inflation. Some economists believe inflation will
accelerate as economic growth strengthens this year. So far, inflation data
still remains tame and we believe will remain fairly tame in the near term. The
reasons? Low wage pressures, risk of deflation in Europe, continued
substitution of capital for labor, subdued credit growth, continue low monetary
velocity, slower growth in China, and demographic factors affecting both baby
boomers and millenials. While we believe there will be increased food price
inflation in the U.S., we don’t believe that would result in systemic high
(over 3-4%) inflation due to these offsetting factors. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140613&ID=17699025&topic=TOPIC_ECONOMIC_INDICATORS&isub=3
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