An economist suggests that China may be holding back on economic stimulus due to Trump's tariff threat. Inflation cools down in August, bringing relief to shoppers and economists. The US stock market reacts to fresh economic data. Plus, a comprehensive overview of the latest economic indicators, commodities, and market trends.
Sources:
https://www.businessinsider.com/china-economy-stimulus-intervention-delay-donald-trump-presidential-eleciton-tariffs-2024-9
https://www.witn.com/2024/09/12/enc-shoppers-economics-expert-react-inflation-cool-down-august/
https://www.ndtvprofit.com/markets/us-stocks-erase-opening-gains-after-volatile-wednesday-as-traders-assess-fresh-economic-data
https://www.economist.com/economic-and-financial-indicators/2024/09/12/economic-data-commodities-and-markets
Outline:
(00:00:00) Introduction
(00:00:47) Xi may be holding back on economic stimulus because of Trump's tariff threat, an economist says
(00:03:26) ENC shoppers and economics expert react to inflation cool down in August
(00:06:02) US Stocks Erase Opening Gains After Volatile Wednesday As Traders Assess Fresh Economic Data
(00:08:45) Economic data, commodities and markets
Simply Economics
China’s Economic Strategy Amid US Election, Inflation Cools Down, Stock Market Reacts to Economic Data
An economist suggests that China may be holding back on economic stimulus due to Trump's tariff threat. Inflation cools down in August, bringing relief to shoppers and economists. The US stock market reacts to fresh economic data. Plus, a comprehensive overview of the latest economic indicators, commodities, and market trends.Sources:https://www.businessinsider.com/china-economy-stimulus-intervention-delay-donald-trump-presidential-eleciton-tariffs-2024-9https://www.witn.com/2024/09/12/enc-shoppers-economics-expert-react-inflation-cool-down-august/https://www.ndtvprofit.com/markets/us-stocks-erase-opening-gains-after-volatile-wednesday-as-traders-assess-fresh-economic-datahttps://www.economist.com/economic-and-financial-indicators/2024/09/12/economic-data-commodities-and-marketsOutline:(00:00:00) Introduction(00:00:47) Xi may be holding back on economic stimulus because of Trump's tariff threat, an economist says(00:03:26) ENC shoppers and economics expert react to inflation cool down in August(00:06:02) US Stocks Erase Opening Gains After Volatile Wednesday As Traders Assess Fresh Economic Data(00:08:45) Economic data, commodities and markets
- Duration:
- 9m
- Broadcast on:
- 13 Sep 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Friday, September 13th. On today's show, an economist suggests that she may be holding back on economic stimulus due to Trump's tariff threat, while ENC shoppers and economics experts react to the cooldown and inflation for August. Plus, US stocks erase opening gains after a volatile Wednesday as traders assess fresh economic data. Economic data, commodities and markets all coming up next. I'm David and you're listening to Simply Economics. We start off with news from China, where the government may be holding back on economic stimulus ahead of the US presidential election next year, according to a new analysis. Beijing is reportedly being cautious due to potential tariffs from Donald Trump if he wins, which could significantly impact China's growth in 2025. For more, we're joined by our economics correspondent. What's behind China's hesitancy to provide more economic support at this time? There are a few key factors at play. First, China's economy is already facing major challenges domestically, including a severe property market downturn, high youth unemployment, and the lingering impacts of COVID lockdowns. Despite this, exports have been a bright spot, helping to prop up growth. However, the prospect of steep US tariffs on Chinese goods under a potential second Trump term puts that export strength at risk. And just how impactful could those tariffs be for China's economy if Trump does win and follow through on his threats? Quite significantly, the economists cited in the article estimates that a 60% US tariff on all Chinese exports could shave 1-2 percentage points off of China's G growth in 2025. For an economy already struggling to hit its 5% growth target this year, that would be a major blow. It would constrain China's ability to use exports to offset weak domestic demand. So essentially, Beijing wants to keep its powder dry and hold stimulus measures in reserve in case they are needed to combat the growth hit from potential Trump tariffs. Exactly. While China has rolled out some modest support, like infrastructure spending funded by special bond issuances, it's been very targeted and limited so far. The thinking seems to be that the economic pain and pressure points haven't reached a critical threshold yet that would force more aggressive action. Things like the growth target, social stability, and financial risks are showing stress, but not yet flashing red. When might we see China decide to step harder on the economic accelerator then? The analyst believes for things to get better, they may have to get worse first. He doesn't expect to see significant stimulus until the first half of 2024. Of course, if Trump does win and follows through with tariffs, China would likely have to respond with yuan depreciation, domestic stimulus, retaliatory tariffs on US goods, and export curbs, but it would be a lose-lose situation with China taking the bigger hit to growth and the US facing higher inflation. A complex economic calculus for China's leaders to navigate with the US political calendar as an added wildcard. Thank you for that insightful analysis of the situation. Using our focus to the domestic front, inflation has been a major concern for many Americans over the past year, with rising prices putting a strain on household budgets. However, new data from the Bureau of Labor Statistics shows that inflation eased again in August, dropping to the lowest level in more than three years. Here to discuss the implications of this development is our economics correspondent. So what do these latest inflation numbers tell us about the state of the economy? The latest data is certainly encouraging, showing that prices climbed just 2.5% in the 12 months up to August. Down from 2.9% in July, this is a significant improvement from the peak of inflation during the pandemic when the rate was over 9%. The cooling of inflation suggests that the economy is stabilizing and that the Federal Reserve's efforts to curb rising prices are having an effect. Despite the positive trend, some shoppers are still feeling the pinch at the grocery store. What's the difference between inflation and actual prices on the shelves? It's important to distinguish between the inflation rate and the level of prices. While the inflation rate has gone down, this doesn't necessarily mean that prices have fallen across the board. In some cases, prices may still be higher than they were pre-pandemic, but the rate at which they are increasing has slowed. For example, the average price of eggs rose slightly from $3.08 in July to $3.00 once in August, even as the overall inflation rate declined. So what does this cooling of inflation mean for the average consumer and what can we expect from the Federal Reserve going forward? The easing of inflation is good news for consumers as it suggests that the cost of living will not continue to rise as rapidly as it has in recent months. This could provide some relief for households that have been struggling to keep up with rising prices. Additionally, the cooling of inflation means that the Federal Reserve is likely to cut interest rates in the near future. The Federal Open Market Committee is set to meet next week to discuss whether to implement a 0.25 or 0.5 percent cut in interest rates, which would reduce borrowing costs across the economy, affecting mortgages, auto loans, and credit cards. As always, we'll be keeping a close eye on these developments and their impact on the economy and American households. Speaking of economic news, U.S. stocks are poised to extend their gains for a fourth straight day as investors digest the latest economic data. The S&P 500 rose 0.7 percent in afternoon trading, while the Dow Jones Industrial Average and NASDAQ Composite climbed 0.4 percent one percent respectively. This comes after some unexpected inflation readings from last month. For more on this, let's bring in our economics correspondent. What can you tell us about these latest inflation figures? The Producer Price Index, or PPI, which measures wholesale prices, rose 0.2 percent in August. That was higher than the 0.1 percent increase that economists were expecting. When volatile food and energy prices are stripped out, the so-called Core PPI also rose 0.2 percent last month. This follows yesterday's report showing Core consumer prices and other key inflation gauge rose more than anticipated in August as well. So it seems inflation is still running hotter than expected, even as the Federal Reserve has been aggressively raising interest rates to try to tame rising prices. How are investors and market watchers reacting to this latest data? Many were caught a bit off guard, especially after the Fed's recent shift in focus from inflation to employment. According to strategists at Bespoke Investment Group, yesterday's CPI report got less attention than usual from traders, and many were unaware the PPI figures were even coming out today. Still, the market's muted reaction suggests investors may be growing more confident in the Fed's ability to engineer a soft landing for the economy. Aside from the broad market gauges, were there any notable individual stock movers on the back of this inflation data or other news? Shares of Moderna dropped sharply down 17 percent after the vaccine maker said it plans to cut its research and development spending by nearly 20 percent over the next three years. On the flip side, Delta Airlines rose over 5 percent after raising its profit forecast. The carrier now expects its full-year earnings to meet or exceed the midpoint of its previous guidance range. Lastly, what's the latest on the bond and commodity markets? The yield on the benchmark 10-year treasury note ticked up to 3.73 percent. That's still well below the nearly 3.5 percent it hit earlier this year on the back of the Fed's rate hikes. Meanwhile, oil prices continue to rebound from recent lows, with Brent crude climbing back towards $72 a barrel after gaining 1.5 percent today. Thanks for that update and analysis of the latest market moving news and economic data. Unfortunately, the additional economic data we had planned to discuss is too limited to have a meaningful dialogue, so we'll have to revisit this topic in a future segment once we have more complete information to work with. Thank you for your understanding. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [Music] [BLANK_AUDIO]