China slides into deflation in July as consumer, factory prices drop

By Bloomberg News

snowballs,” SovEcon Managing Director Andrey Sizov said. “Everything is used almost.”

For now, Russia’s smaller ports on the Azov Sea are more overloaded than the main Black Sea grain port of Novorossiysk, SovEcon said. Vessels sailing from Azov Sea ports usually unload onto bigger ships at the Kerch Strait, which sail onward through the Black Sea, but navigation through the strait has been restricted for safety reasons after an attack on the Kerch Bridge earlier this month.

Black Sea

ANY escalation in the Black Sea could have big knock-on effects for global grain trade. Kyiv hit a Russian oil tanker over the weekend and warned that more attacks could follow, as it seeks to retaliate for the Kremlin’s efforts to cripple Ukrainian grain exports. That may make some ship owners more cautious about calling at Russian Black Sea ports. If the backup persists or worsens, that could create storage headaches for the country’s grain growers and force them to pile more up at farms. For example, they may not have space to store different kinds or classes of wheat separately, according to Dmitry Rylko, director of Moscow-based consultant IKAR.

“The storage situation is quite tense,” he said. “Despite the high exports there’s still a lot of grain, and the south is expecting the second wave of the harvest.”

The consumer price index dropped 0.3 percent last month from a year earlier, the National Bureau of Statistics said Wednesday, marking its first decline since February 2021. Economists surveyed by Bloomberg had predicted a 0.4 percent decline in prices.

Producer prices fell for a 10th consecutive month, contracting 4.4 percent in July from a year earlier, slightly worse than expected. It’s the first time since November 2020 that both consumer and producer prices registered contractions.

China is experiencing a rare period of falling prices as consumer and business demand weakens after an initial burst in the first quarter following the ending of pandemic restrictions. A prolonged property market slump, plunging demand for exports and subdued consumer spending are weighing on the economy’s recovery.

“China is in deflation for sure,” Robin Xing, chief China economist at Morgan Stanley, said in an interview with Bloomberg TV. “The question is how long. It’s up to the policymakers—will they react with coordinated fiscal and monetary easing.”

The Hang Seng China Enterprises Index trimmed earlier losses of as much as 0.9 percent to trade 0.2 percent lower as of 11:35 a.m. local time. The onshore benchmark CSI 300 Index of stocks also fell slightly by the mid-day break. The yuan traded offshore gained 0.2 percent to reach 7.2212 per dollar.

More stimulus

INVESTORS are betting the weak inflation data will prompt the People’s Bank of China to add more monetary stimulus, like cutting interest rates. However, the central bank is facing several constraints that’s making it cautious, such as a weaker yuan and elevated debt levels in the economy. Fiscal support has also been moderate, given the financial pressures many local governments are facing.

“They need to accelerate all the government spending, raising government debt and do coordinated monetary and fiscal easing, to break this debt deflation trap,” Xing said.

Another thing holding authorities back from further policy loosening: Fears about whether the money released into the banking system by the PBOC would be stuck there, rather than used to fund productive activity.

“Some companies are reluctant to expand production” as their expectations about profit soften, the Economic Daily wrote in a front-page article on Wednesday. The newspaper is affiliated with the State Council, China’s cabinet.

That weak demand for financing among those firms “drove them to put loans obtained immediately into deposits,” according to the article. “Liquidity is flush in the financial system.”

The statistics bureau attributed the decline in consumer prices to the high base of comparison with last year, saying the contraction is likely to be temporary and consumer demand continued to improve in July.

“With the impact of a high base from last year gradually fading, the CPI is likely to rebound gradually,” Dong Lijuan, chief statistician at the NBS, said in rare additional comments to accompany the official data.

Beijing has tried to downplay the risk of deflation in the economy with some Chinese-based analysts saying they were instructed by regulators and their companies not to discuss the matter publicly. PBOC officials said last week that China will avoid deflation in the second half of the year, with consumer-price growth likely to trend closer to 1 percent by the end of the year.

Falling prices also suggest real financing costs in the economy are going up, which some economists argue should add to the urgency for the PBOC to take action to prevent growth momentum from weakening further.

“CPI and PPI both dropping into negative territory in the short term has in fact lifted real interest rates,” Bruce Pang, head of research and chief economist for greater China at Jones Lang LaSalle Inc.

“There’s a greater necessity to cut the RRR than interest rates in the short term, as there’s still room for various structural monetary policy tools and policy bank financing tools,” he said, referring to the amount of cash banks are required to keep in reserve.

Food prices

THE core inflation measure, which excludes volatile food and energy costs, picked up to 0.8 percent from 0.4 percent, a sign of underlying—although subdued—demand in the economy. A breakdown of the consumer inflation figures showed prices for household goods, food and transport contracted, while prices of services spending, like recreation and education, climbed.

“We expect CPI will be negative

Pakistan’s imprisoned former prime minister appeals his conviction and 3-year sentence

By Munir Ahmed The Associated Press

ISLAMABAD—Pakistan’s imprisoned former Prime Minister Imran Khan on Tuesday appealed his conviction and three-year sentence in a graft case, one of his lawyers said.

The development is the latest in the political drama in Pakistan surrounding the former cricket star and top opposition leader ahead of upcoming parliamentary elections.

The 70-year-old Khan, who was ousted in a no-confidence vote in April 2022, was arrested over the weekend and sentenced for concealing assets after selling state gifts he received while in office.

Khan has denied the charge, saying he did not violate any laws.

Naeem Haider Panjutha, Khan’s lawyer, said the Islamabad High Court would hear the appeal on Wednesday. The lawyer met with Khan on Monday at the high-security Attock prison in eastern Punjab province.

Speaking to reporters after filing the appeal in Islamabad, Panjutha said Khan’s conviction should be declared “illegal and without lawful authority.” He also asked the court to acquit Khan, claiming he was arrested illegally.

Separately, Khan’s defense team is petitioning the court for better prison facilities for the former prime minister, Panjutha said.

Khan’s Pakistan Tehreek-e-Insaf party and critics have said the former premier was being politically victimized by his successor, Prime Minister Shehbaz Sharif, a charge the government denies.

Sharif said he would step down on Wednesday, after the five-year term of the current parliament runs out and ahead of the next parliamentary elections, expected in October or November.

Sharif spoke on Tuesday to a gathering of families of fallen soldiers and members of the country’s security forces killed in fighting militants. “They sacrificed their lives for the motherland, and the whole nation is proud of them,” he said.

Under Pakistan’s constitution, after Sharif steps down and the parliament is disbanded, a caretaker government is installed to run day-to-day affairs and lead the country to the next election.

Sharif’s ruling Pakistan Muslim League party is expected to face tough competition from Khan’s party—though Khan himself would be unable to contest the election unless his appeal is granted and he is released from prison.

Pakistan’s Election Commission on Tuesday disqualified Khan from running for office for five years, based on his conviction and sentence. Under Pakistan’s laws, no convicted person is eligible to lead a party, run in elections, or hold public office.

Panjutha earlier in the week said Khan was in good spirits and maintaining “a high morale” despite the harsh conditions at Attock prison, which was established in 1905 during British colonial rule. The facility holds convicted militants and the most hardcore criminals during trial proceedings.

Panjutha said Khan is being held in a “small room at the prison where there is no air conditioner and where there are flies in daytime and insects at night.” only for the short term, like for one to two months,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “Food and energy prices are more likely to go up instead of going down in the second half of the year. That means the drag on CPI seen in the first half from food and fuel will like ease.”

Khan was previously arrested in May on corruption charges, triggering a wave of violent protests across the country. Days later, Pakistan’s Supreme Court ordered his release, saying his arrest was illegal.

“Details in the data suggest this marks a nadir. A month-on-month rise in the CPI and a pickup in the core gauge are early signs that CPI inflation is bottoming out.

The PPI is starting to stabilize as base effects turn more favorable. Stepped-up policy support for the economy will probably help prices rebound in the second half the year,” said Bloomberg economist Eric Zhu.

While PPI has likely bottomed out, “it will be rather hard to emerge from deflation in the rest of the year,” he said.

Using the gross domestic product deflator—a measure of economy-wide prices—China was in deflation in the first half of the year. The International Monetary Fund defines deflation as “a sustained decline in an aggregate measure of prices,” such as the CPI or the GDP deflator.

Unlike the temporary drop in consumer prices in late 2020 and early 2021 driven by falling pork prices, the contraction this time around is driven by more longerterm factors such as falling external demand and the property downturn. With export prices falling, China is set to pass on deflationary pressure to other countries via its massive goods trade. With assistance from Zhu Lin and Wenjin Lv/Bloomberg

Children

By Reed Stevenson

AN estimated 42 percent of adult Japanese women may end up never having children, the Nikkei newspaper reported, citing a soon-to-be-published estimate by a government research group.

In a more optimistic scenario, a quarter of women born in 2005 may end up not having offspring. The midpoint estimate by Japan’s National Institute of Population and Social Security Research calls for a third of them not having children, the newspaper reported Wednesday.

Birthrates are a critical issue for Japan and other countries with rapidly aging populations.

The island nation posted the fewest births in its recorded history last year, continuing a sevenyear decline. With a smaller workforce and fewer taxpayers to sustain the world’s third-largest economy, Japan has become one of the world’s most indebted countries.

The percentage of childlessness is even higher for men, with as many as 50 percent never seen having children, according to the report, the Nikkei said. With assistance from Marika Katanuma/Bloomberg

Editorial

It’s every Pinoy’s right to have medical care

PresIdent Marcos highlighted in his recent state of the nation Address that the administration’s nation-building efforts couldn’t succeed without providing adequate attention to the population’s health. In line with the government’s efforts to prioritize health-related expenditures, the President said the department of Health’s budget is now the third highest after education and Public Works.

To help the poor and keep more people healthy, Marcos said that prices of essential medications have decreased by about 40 percent. In addition, 60 specialty centers opened to the public in 2022, while 3,400 projects to construct more public health facilities were completed.

“As of this year, more than 80 percent of our eligible children have been vaccinated against measles, rubella, and polio,” the President said, adding that PhilHealth’s Konsulta Package has increased the number of free dialysis sessions to 156 from 90 in 2022.

Marcos recently vowed to make medical care more accessible in underserved communities through the capacity building for local government units (LGUs) and the construction of new facilities such as the Clark Multi-Specialty Medical Center (CMSMC). (Read, “PBBM vows wider medical care access,” in the BusinessMirror , July 18, 2023).

“That is why it is a fundamental part of the services that this government will bring to our people. It is not a privilege to have healthcare,” Marcos said during the recent site inspection for the CMSMC at the Clark Freeport Zone in Pampanga. “It is a right and that is how we will approach this problem, and that is how we will continue to make our healthcare system better for all Filipinos in whatever capacity that we are able to do.”

Citing the important role played by the healthcare sector during the pandemic, the President said he will prioritize making health services available at the local level through his administration’s Health Facility Enhancement Program (HFEP).

The comprehensive HFEP includes establishing the “Botika de Barangay” or barangay pharmacies program, rural and barangay centers, as well as medical special centers such as the CMSMC.

“This is part of a larger system of healthcare provision that we are putting together to service our citizens so that they don’t have to wait [or] get very very sick before they go to the big hospitals. We are bringing healthcare down to the people,” the chief executive said.

Marcos is also pushing for more public-private partnerships (PPP) to improve healthcare delivery across the country. During the groundbreaking ceremony of the St. Bernadette Children and Maternity Hospital in San Jose del Monte, Bulacan, the President said the government and private sector must work together to make healthcare more accessible and affordable to every Filipino.

Marcos urged the private sector and medical professionals to support the administration’s healthcare programs. “I am encouraging the private sector and medical professionals to support and advocate for our healthcare programs in the government, such as medical services and funding health infrastructure, especially in far-flung and disadvantaged communities,” he said.

Stressing the need for a whole-of-society approach to enforce effective health policies that leave no one behind, Marcos said only when we have a healthy citizenry could we establish a progressive Philippines where no one is left behind. After all, as Winston Churchill eloquently said, “Healthy citizens are the greatest asset any country can have.”