Latest news with #deflation
South China Morning Post
3 days ago
- Business
- South China Morning Post
Reaping of the sow: China to reduce pig count by 1 million amid low prices, deflation risk
China's national breeding sow inventory will be reduced by 1 million from the current level of 40.38 million to ease an oversupply of pork in the market that has suppressed swine prices and raised deflationary pressures in the economy. While specifics of the reduction were limited, it would take the national sow herd size down to 39.5 million, said in an exclusive report, citing a plan proposed by the Ministry of Agriculture and Rural Affairs last week. The ministry was looking to ease industry losses caused by an oversupply of hogs and persistently low pork prices, the website, which is an online tech and financial news platform, reported on Tuesday. In addition to cutting the number of sows, regulators have reportedly introduced stricter rules for pig farms, like prohibiting pigs that have already reached the slaughtering standard from continuing to be fed to increase their weight before being sold – an industry practice blamed for worsening short-term oversupply and further depressing prices. The measures are not only aimed at restoring a healthier supply-demand balance in the pork sector, but also at easing deflationary pressure in the broader economy, since the price of pork is highly weighted in China's consumer price index that tracks the price changes of a basket of goods and services purchased by consumers. 2025 could be another year with persistent deflationary pressures, unless the stimulus is big enough to create another credit upcycle, according to a report by Macquarie last week. China's GDP deflator has fallen for eight quarters in a row, marking the longest deflationary streak in the past four decades, the report said, referring to the measurement of the overall price level for new, domestically produced goods and services – making it a broad measure for inflation.
South China Morning Post
3 days ago
- Business
- South China Morning Post
China's consumer-goods spending sees recovery as deflation eases, Bain says
China's fast-moving consumer goods (FMCG) sector is seeing some signs of a tentative recovery in spending, tempering declines in selling prices in an economy under years of deflation, according to a report by Bain & Company. Value grew 2.7 per cent in the first quarter from a year earlier, as festive spending helped fuel a 5.3 per cent gain in volume, the firm said in a market research report published last week. The average selling price fell 2.5 per cent, following a 3.4 per cent slide in 2024 that was the worst in four years, it added. Bain tracks and analyses FMCG goods deemed to be daily necessities that households buy on a daily or weekly basis across four sectors: packaged food, beverage, personal care, and home care products. It does not cover categories like apparel, appliances, travel and restaurant spending. 'The overall market trend for 2025 is unclear' because of persistent deflation, according to the report co-authored by Bain's senior partners Derek Deng and Bruno Lannes and Rachel Lee, general manager of Worldpanel China. 'A downtrading trend was consistent across all four major categories.' 13:04 What does it mean for the world when Chinese consumers tighten their belts? What does it mean for the world when Chinese consumers tighten their belts? China's macroeconomic conditions improved while consumer confidence stabilised and Beijing announced more policies to support domestic consumption and crank up growth as exports struggled amid tariff and trade barriers. The government in March unveiled a strategy to raise wages and reduce households' financial burdens.
Yahoo
11-06-2025
- Business
- Yahoo
Swiss deflation fuels talks of negative interest rates: Is SNB ready?
Remember negative interest rates? Back in early 2020, as the world grappled with the COVID-19 pandemic, central banks across advanced economies rushed to slash interest rates, offering cheaper borrowing to cushion the economic blow alongside unprecedented fiscal support. In many countries, rates tumbled to near or even below zero — an extraordinary policy shift reflecting the urgency of avoiding a prolonged recession. Fast forward five years, and no major economy currently operates with rates at or below zero. But Switzerland could soon change that. Switzerland could soon become the first advanced economy to re-enter the era of negative interest rates. A confluence of weakening price pressures and a subdued economic outlook has sparked growing expectations that the Swiss National Bank (SNB) will resume ultra-loose monetary policy, potentially cutting interest rates below zero in the coming months. Last week, the Swiss Federal Statistical Office reported that consumer prices fell by 0.1% in May 2025 compared to a year earlier, marking the first deflationary print since March 2021. The decline was broad-based, with notable year-on-year contractions in transport costs (-3.7%), food and non-alcoholic beverages (-0.3%), healthcare (-0.2%), and household goods and services (-2.6%). While a modest bout of deflation is not in itself alarming, it underscores the fragility of domestic demand and presents a challenge for the SNB's inflation target. The central bank defines price stability as annual inflation between 0% and 2%. "Swiss inflation could remain close to 0%, which represents the lower end of the SNB's price stability range," said Niklas Garnadt, economist at Goldman Sachs. The expert identified declining inflation expectations, falling energy prices, and potential trade frictions as downside pressures on the price outlook going forward. The SNB, which currently holds its policy rate at 0.25%, meets on 19 June, and economists are expecting another rate cut of 25 basis points. According to Goldman Sachs' base case, the SNB will lower its policy rate to -0.25% by September, in two successive cuts. Yet, there is a 40% chance, the bank noted, that policymakers may opt for more aggressive easing, with two 50 basis point cuts taking the rate back to -0.75% — the lowest in its history. Although the SNB also has foreign exchange operations at its disposal, economists expect interest rate cuts to take precedence in the near term. There are some reasons for this preference, according to Goldman Sachs. "The SNB has prior experience managing the impact of negative rates," Garnadt said. Moreover, domestic inflation is more responsive to interest rates than currency movements. And finally, Switzerland remains on the US Treasury's watchlist for currency manipulation, potentially constraining foreign-exchange intervention activity. That said, foreign exchange interventions have not been ruled out entirely. During the post-2008 low-inflation years, the SNB frequently bought foreign currency to stem franc appreciation. The SNB is again navigating familiar territory, balancing the need to support inflation against the risks of overreliance on unconventional measures. While Switzerland's economic fundamentals remain relatively strong, the renewed threat of deflation could push the central bank to breach interest-rate lower bounds again. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
11-06-2025
- Business
- Bloomberg
China Nudges Pig Farmers to Restrain Supply After Prices Slump
China is seeking to control hog numbers and curb pork production, in a bid to support prices of the country's favorite meat and ease deflationary pressures in the economy. Authorities have asked farmers to be prudent when it comes to expanding their sow herds, and to halt secondary fattening of livestock, according to people familiar with the matter, who declined to be named as they aren't authorized to speak publicly. The latter practice involves buying standard pigs and fattening them beyond normal slaughter-weights to boost meat output.
News24
10-06-2025
- Business
- News24
Price wars grip China: R7 breakfasts, R500 for a luxury Coach bag
• For more financial news, go to the News24 Business front page. Chinese energy sector worker Mandy Li likes to treat herself to a luxury brand handbag once in a while. But since her state-owned employer cut her wage by 10% and the properties her family owns lost half their value, she only buys second-hand ones. "I'm cutting down on large expenditures," said 28-year-old Li, while browsing for items in Beijing's Super Zhuanzhuan second-hand luxury items store that opened in May. "The economy is definitely in a downturn," she said, adding: "My family's wealth has shrunk by a lot" due to the property crisis China has been grappling with since 2021. As deflationary pressures mount in the world's second-largest economy, consumer behaviour is changing in ways that could lead to further downward pressure on prices, raising concerns that deflation could become entrenched, posing more headaches for China's policymakers. Data showed on Monday that consumer prices fell 0.1% in May from a year earlier, with price wars raging in a number of sectors, from autos to e-commerce to coffee amid concerns about oversupply and sluggish household demand. "We still think persistent overcapacity will keep China in deflation both this year and next," Capital Economics said in a research note. New businesses are seeking success by targeting penny-pinchers, from restaurants selling 3 yuan (R7.40) breakfast menus to supermarkets offering flash sales four times a day. But this trend is worrying economists who see price wars as ultimately unsustainable as losing firms may have to close and people may lose their jobs, fuelling further deflation. Consumer price sensitivities' have accelerated growth in the Chinese second-hand luxury market since the pandemic, with annual growth rates surpassing 20% in 2023, according to an industry report by Zhiyan Consulting from last year. But that growth has also led to a spike in the volumes of such items available for sale - which is noticeable in the level of discounts on offer. Some new stores, including Super Zhuanzhuan, are offering items at discounts of up to 90% of their original price, compared with industry standards of 30-40% in recent years. Discounts of 70% or more are also now common on large second-hand platforms, such as Xianyu, Feiyu, Ponhu and Plum. "In the current economic environment we are seeing more existing luxury consumers shifting to the second-hand market," said Lisa Zhang, an expert with Daxue Consulting, a market research and strategy firm focusing on China. But sellers "have more discounts and it's due to more competition." At Super Zhuanzhuan, a green, carryall Christie handbag model by Coach, which its first owner bought for 3 260 yuan (R8 000) can be re-purchased for 219 yuan (R540). A 2 200 yuan Givenchy G Cube necklace can be found for 187 yuan. "Year-to-year, it's like 20% growth in the number of sellers, but the buyers' numbers are pretty much stable," said the founder of another second-hand luxury business in China, asking for anonymity to speak candidly about the state of the industry. "The middle class - their salary has really decreased. The economy is the number one reason we're seeing these trends." He said big cities such as Shanghai and Beijing have enough buyers to accommodate new market entrants, but elsewhere in China there isn't any room for more. "I would expect the majority of the stores which have recently opened up will actually close," he said. University professor Riley Chang was browsing through Super Zhuanzhuan not because she wanted to buy anything new - she hasn't spent money on big brands since the pandemic - but because she wanted to see what the market was if she sold any of her own possessions. She wasn't happy with what she saw. "I've been to several major second-hand luxury stores in Beijing and Shanghai and they all try to push your price as low as possible," said Chang.
