Daily Management Review

Chinese Data Industry Is Being Overrun By Fed


The data will over shadow Chinese data industry in the coming days, informs Reuters.

In the following weeks the spot light will be on the “U.S. Federal Reserve” which is likely to over shadow China’s data industry. It is an indicative of a “grim inflation” in the euro zone which also affects the “rate decisions in Japan and Switzerland”. All are left to guess whether Fed will hike up prices or it will hold up for “later date”, probably sometimes in December. Whatever, the action of Fed may be, but pondering over the it is a “a futile exercise”, states Reuters, as the “rate settlers” are still unsure, whereby the probability of the final decision being pushed to “the wire” to very high.
There has also been an “unexpected drop” in job numbers, which led to increased jobless people, whereby raising the rate to “5.1 percent”. However, the revision in the second quarter also requires a much needed growth of “3.7 percent” which will hike up support call in the midst of tightening labour market. Nevertheless, the chance of success remains at a mere “24 percent” as the “emerging market in China is seen struggling through inflation, while some Fed Watchers “argue against a hike”. Deutsche Bank’s “chief international economist”, Torsten Sloek states:
"My best guess is that the committee is also confused about what the right decision is, and as a result they are waiting to the last minute with making a decision”.
While Sloek adds:
"The cost of this approach is that market expectations become unanchored but they may view this as a small cost relative to sending strong signals ahead of a meeting where there seems to be limited consensus among (rate setting) members”.
The slowing economy of China can become the main bothersome issue for the Fed, while the other signs like “14 percent drop in Chinese imports over the past year”, deflation of factory gate’s annual price to six percent along with consequent tenth monthly drop, cannot support the “hike arguments”.
Moreover, Sunday’s data revealed that the factory output and the Chinese investment were below their forecast level in the month of August, which triggered the chances of the country’s economy dipping under seven percent of its estimated growth. There are also growing fears the deflation along with the heavy amount of dollar being spent in order to keep yuan on a steady level, will lead to further “rate cuts and currency devaluation” in Beijing. By the end of August, Europe will finalise the “euro zone inflation data”, which can also raise up “another arguments” whereby the “European Central Bank” can substantiate “quantitative easing”.
In fact, the growth of price is suppose to remain “steady at 0.2 percent”, although it will remain well under the “ECB's target”. The president of ECB, Mario Draghi fears that this could “dip back” euro zone into deflation affecting the commodity prices along with weakening the emerging markets’ growth. A RBS’s note for clients writes:
"Are central bankers losing credibility? Preliminary results from our survey show that 68 percent of investors believe so. Yet, we are stuck in a world where central bankers’ words will determine investment decisions, often beyond fundamental reasoning."