China falls back into deflation territory; UK energy companies pay £10.8m for missing smart meter targets – business live

From 31m ago

Introduction: China’s economy falls back into deflation as pork prices tumble

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

China has dropped into deflationary territory for the second time this year, reigniting concerns over its economy.

Consumer prices in the world’s second-largest economy fell by 0.2%, compared with the previous year, in October, a larger decline than the 0.1% expected.

Chinese producers also cut their prices at a faster rate. The producer price index (a measure of prices at the factory gate) fell 2.6% year-on-year, following a 2.5% drop in September. That could push inflationary pressures down globally.

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🇨🇳 China's consumer prices back in decline as recovery wobbles
China's consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
— PiQ (@PiQSuite) November 9, 2023

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🇨🇳 China’s consumer prices back in decline as recovery wobbles
China’s consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
— PiQ (@PiQSuite) November 9, 2023

The drop in China’s CPI was partly due to cheaper food prices – pork, for example, cost 30% less than a year ago, with an oversupply of pigs and weak demand making this popular staple cheaper.

But there was also a notable slowdown in core inflation (stripping out food and energy), which fell to 0.6% in October from 0.8% in September.

While cheaper goods and services are welcome news for Chinese consumers, the fall in prices will worry Beijing, as it suggests economic demand remains weak almost a year after pandemic restrictions were ended.

Back in August, China’s inflation rate fell below zero, before returning to positive terrirory in October.

Deflation is a serious situation – falling price levels lead to a rapid slowdown in economic activity as consumers cut spending and business invest less (on the logical grounds that it will be cheaper next year).

However, is a small drop in prices actually full-blown inflation?

Robert Carnell, ING’s regional head of research for the Asia-Pacific, argues that China is actually grappling with “low underlying inflation”.

Carnell says:

What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today’s data show is that it doesn’t take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.
If you want to use any term, “disinflation” would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.

Carnell adds that the inflation report highlights the “hog cycle” – when pork prices are high, farmers hold back pigs from the market to expand their herds, leading to a glut, causing herd shrinkage, etc etc.

He says:

China is not experiencing “deflation” as most headlines attest. But its pork prices are undoubtedly much lower, good news for all except farmers probably

The agenda

8.10am GMT: European Central Bank chief economist Philip Lane speaks at the ECB Conference on Money Markets 2023 in Frankfurt, Germany
9am GMT: ECB economic bulletin released
11am GMT: Ireland’s consumer price inflation data released
1.30pm GMT: US weekly jobless report

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China’s fall into deflation last month is the latest data to confirm anaemic economic conditions in the country, says Kyle Rodda, senior financial market analyst at Capital.com.

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The cause of the malaise is a subject of robust debate. Still, most agree it’s some combination of a confidence crisis, a cyclical slowdown, and structural problems related to pockets of leverage in the economy.
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While policymakers have avoided the bazooka-style stimulus that drove China’s economy out of the 2008 slump and 2015 asset bubble, recent tweaks to monetary policy and a pledge of more profound deficit spending to achieve growth targets signal intent to boost economic activity. So far, the impacts have only been modest.
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The insensitivity to policy support may throw wait behind the “balance sheet recession” argument for why China is stuck in such stagnation, a la the Japanese experience in the late 20th century.
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Goldman Sachs have predicted that China’s headline CPI should rise gradually in the coming months, although “persistent pork prices deflation is likely to slow the pace”.

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Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, warned that “combating persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” adding:

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“An appropriate policy mix and more supportive measure are needed to prevent the economy from a downward drift in inflation expectations that could threaten business confidence and household spending.”
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Newsflash: Britain’s energy regulator has fined six suppliers a total of £10.8m for missing their targets for smart meter installation last year.

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British Gas, OVO, Bulb, E.ON, Scottish Power and SSE all missed their rollout targets, leading to a shortfall of 1,026,628 smart meters, Ofgem has announced.

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The suppliers have all agreed to make payments into Ofgem’s Energy Industry Voluntary Redress Fund (EIVRF) – whicih is used to provide help to consumers in vulnerable situations who are most at risk from cold homes and high energy bills.

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Cathryn Scott, director of Enforcement and Emerging Issues at Ofgem, said:

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“The installation of smart meters is a vital step in the modernisation of our energy system and the path to net zero by 2050. Smart meters give customers better information about their energy usage helping them budget and control their costs.”
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Some suppliers did cite “mitigating factors” for missing their targets, some of which Oftem considered when setting their payments into the EIVRF, but didn’t hold a detailed review into what went wrong.

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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

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China has dropped into deflationary territory for the second time this year, reigniting concerns over its economy.

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Consumer prices in the world’s second-largest economy fell by 0.2%, compared with the previous year, in October, a larger decline than the 0.1% expected.

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🇨🇳 China's consumer prices back in decline as recovery wobbles
China's consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
— PiQ (@PiQSuite) November 9, 2023

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The drop in China’s CPI was partly due to cheaper food prices – pork, for example, cost 30% less than a year ago, with an oversupply of pigs and weak demand making this popular staple cheaper.

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But there was also a notable slowdown in core inflation (stripping out food and energy), which fell to 0.6% in October from 0.8% in September.

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Back in August, China’s inflation rate fell below zero, before returning to positive terrirory in October.

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However, is a small drop in prices actually full-blown inflation?

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Robert Carnell, ING’s regional head of research for the Asia-Pacific, argues that China is actually grappling with “low underlying inflation”.

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Carnell says:

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\n
What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today’s data show is that it doesn’t take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.
\n
If you want to use any term, “disinflation” would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.
\n

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He says:

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\n
China is not experiencing “deflation” as most headlines attest. But its pork prices are undoubtedly much lower, good news for all except farmers probably
\n

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The agenda

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8.10am GMT: European Central Bank chief economist Philip Lane speaks at the ECB Conference on Money Markets 2023 in Frankfurt, Germany

9am GMT: ECB economic bulletin released

11am GMT: Ireland’s consumer price inflation data released

1.30pm GMT: US weekly jobless report

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Key events

China in deflation; what the experts say

China’s fall into deflation last month is the latest data to confirm anaemic economic conditions in the country, says Kyle Rodda, senior financial market analyst at Capital.com.

The cause of the malaise is a subject of robust debate. Still, most agree it’s some combination of a confidence crisis, a cyclical slowdown, and structural problems related to pockets of leverage in the economy.
While policymakers have avoided the bazooka-style stimulus that drove China’s economy out of the 2008 slump and 2015 asset bubble, recent tweaks to monetary policy and a pledge of more profound deficit spending to achieve growth targets signal intent to boost economic activity. So far, the impacts have only been modest.
The insensitivity to policy support may throw wait behind the “balance sheet recession” argument for why China is stuck in such stagnation, a la the Japanese experience in the late 20th century.

Goldman Sachs have predicted that China’s headline CPI should rise gradually in the coming months, although “persistent pork prices deflation is likely to slow the pace”.

Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, warned that “combating persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” adding:

“An appropriate policy mix and more supportive measure are needed to prevent the economy from a downward drift in inflation expectations that could threaten business confidence and household spending.”

Energy suppliers pay £10.8m for missing smart meter installation targets

Newsflash: Britain’s energy regulator has fined six suppliers a total of £10.8m for missing their targets for smart meter installation last year.

British Gas, OVO, Bulb, E.ON, Scottish Power and SSE all missed their rollout targets, leading to a shortfall of 1,026,628 smart meters, Ofgem has announced.

Cathryn Scott, director of Enforcement and Emerging Issues at Ofgem, said:

“The installation of smart meters is a vital step in the modernisation of our energy system and the path to net zero by 2050. Smart meters give customers better information about their energy usage helping them budget and control their costs.”

A chart showing payments from energy companies for missing smart meter rollout targets — Photograph: Ofgem

Introduction: China’s economy falls back into deflation as pork prices tumble

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

China has dropped into deflationary territory for the second time this year, reigniting concerns over its economy.

Consumer prices in the world’s second-largest economy fell by 0.2%, compared with the previous year, in October, a larger decline than the 0.1% expected.

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🇨🇳 China's consumer prices back in decline as recovery wobbles
China's consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
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🇨🇳 China’s consumer prices back in decline as recovery wobbles
China’s consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
— PiQ (@PiQSuite) November 9, 2023

The drop in China’s CPI was partly due to cheaper food prices – pork, for example, cost 30% less than a year ago, with an oversupply of pigs and weak demand making this popular staple cheaper.

But there was also a notable slowdown in core inflation (stripping out food and energy), which fell to 0.6% in October from 0.8% in September.

Back in August, China’s inflation rate fell below zero, before returning to positive terrirory in October.

However, is a small drop in prices actually full-blown inflation?

Robert Carnell, ING’s regional head of research for the Asia-Pacific, argues that China is actually grappling with “low underlying inflation”.

Carnell says:

What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today’s data show is that it doesn’t take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.
If you want to use any term, “disinflation” would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.

He says:

China is not experiencing “deflation” as most headlines attest. But its pork prices are undoubtedly much lower, good news for all except farmers probably

The agenda

8.10am GMT: European Central Bank chief economist Philip Lane speaks at the ECB Conference on Money Markets 2023 in Frankfurt, Germany
9am GMT: ECB economic bulletin released
11am GMT: Ireland’s consumer price inflation data released
1.30pm GMT: US weekly jobless report

The Guardian