Tuesday, November 29, 2016
Mortgage loans are so hard to get in some cities in China that there are rumors that larger banks have suspended mortgage lending in those areas. The People’s Bank of China and other officials deny those rumors in reports published today. Bank lending has fallen, not just in mortgages but in most categories. Mortgages make up roughly half of all lending in China. Local governments have taken steps to reduce real estate speculation that has driven up property values above what most observers think are sustainable levels. A real estate bubble makes it harder for banks to finance real estate purchases, since the real estate itself may not serve as effective collateral for the loan.
Saturday, November 26, 2016
If the world is losing interest in manufactured goods, that might show up first in U.S. retail statistics for Black Friday. The unofficial shopping holiday is focused more than any other day of the year on consumer products, most of them manufactured in countries in Asia. The Christmas shopping season got off to a slow start in November with the distractions of the political seasons, so it was hoped that shoppers would make up for that when Black Friday, the peak shopping day of the season, rolled around. Unfortunately, observations of retail traffic showed that Black Friday retail traffic was down slightly from 2015. Now preliminary sales statistics suggest that sales were down more sharply than they appeared. In-store sales on Thanksgiving and Black Friday combined were down 11 percent from the year before. Most or all of that decline was seen on Black Friday morning, with retail traffic said to be down about one third from the year before. Online sales were up 18 percent but are still much smaller than in-store sales, so total sales must be down substantially for the season do far.
The slow sales are especially a concern for retailers that stocked up in a big way anticipating an increase over last year’s results. Among major U.S. retailers, Walmart was the only one to go all-out this season, describing its plans as a 50 percent increase in inventory levels. If sales at Walmart did not increase as planned the retailer will be left with an enormous inventory overhang. This is bad news for Chinese manufacturing, as Walmart, besides being the largest U.S. retailer, is also the one most noted for carrying Chinese-made products. Walmart’s inventory reorders will have to be smaller in the months ahead.
Wednesday, November 9, 2016
On election night in the United States it is North American currencies declining as election-day optimism fades. Mexico’s currency has fallen to a record low but the U.S. and Canadian dollars have also fallen off sharply with fears of a prolonged U.S. recession. China’s markets and currency have held relatively steady today but will eventually be affected by reduced opportunity for exports to the three Nafta countries.
Tuesday, November 8, 2016
The U.S. election is affecting China’s currency reserves. Optimism about the U.S. election has boosted U.S. currency but partly as a result, China’s currency has fallen. The yuan is also hurt by continuing decline in manufacturing and by capital flight. Much of the capital flight is a response to the currency decline. At the same time, with global demand for manufactured goods barely holding steady, there is little incentive to invest in China’s already overbuilt manufacturing sector. China may not be able to support its currency much longer because of its declining currency reserves. Reserves fell 1.4 percent last month to their lowest level in five years.