Key Indicator
United States: PPI: NSA
United States: University of Michigan Consumer Confidence Index (CCI): Preliminary: Anomaly
United States: ISM Manufacturing PMI - Final (SA)
United States: CPI: NSA
COMEX Inventory: Silver
S&P 500 Index
Global: GDP Gowth Rate - United States
Global Foundries' Revenue
DRAM Makers' Fab Capacity Breakdown by Brand
NAND Flash Makers' Capex: Forecast
IC Design Revenue
Server Shipment
Top 10 MLCC Suppliers' Capex: Forecast
LCD Panel Makers' Revenue
AMOLED Capacity Input Area by Vendor: Forecast
Smartphone Panel Shipments by Supplier
Notebook Panel Shipments (LCD only): Forecast
Smartphone Panel Shipments by Sizes: Total
Notebook Panel Shipments (LCD only)
PV Supply Chain Module Capacity: Forecast
PV Supply Chain Cell Capacity: Forecast
PV Supply Chain Polysilicon Capacity
PV Supply Chain Wafer Capacity
Global PV Demand: Forecast
Smartphone Production Volume
Notebook Shipments by Brand
Smartphone Production Volume: Forecast
Wearable Shipment
TV Shipments (incl. LCD/OLED/QLED): Total
China Smartphone Production Volume
ITU Mobile Phone Users -- Global
ITU Internet Penetration Rate -- Global
ITU Mobile Phone Users -- Developed Countries
Electric Vehicles (EVs) Sales: Forecast
Global Automotive Sales
AR/VR Device Shipment: Forecast
China: Power Battery: Battery Output Power: Lithium Iron Phosphate Battery: Month to Date
China: Vehicle Inventory Alert Index
Micro/Mini LED (Self-Emitting Display) Market Revenue
Micro/Mini LED (Self-Emitting Display) Market Revenue: Forecast
LED Chip Revenue (Chip Foundry+ In House Used): Forecast
GaN LED Accumulated MOCVD Installation Volume
Video Wall-Display LED Market Revenue: Forecast
Consumer & Others LED Market Revenue
2025-01-22
U.S. President Donald Trump officially took the oath of office on January 20 and immediately signed a series of executive orders and memoranda addressing a wide range of issues, including immigration, trade, energy, federal personnel, national security, and gender and cultural policies : Trade and Economy No New Tariffs on China, Potential Duties on Mexico and Canada President Trump announced no new tariffs on China but indicated that duties as high as 25% could be imposed on Mexico and Canada by February 1. He also suggested the possibility of implementing "universal tariffs" in the future. Establishment of an "External Revenue Service" Trump proposed creating a new agency to use tariff revenues to reduce domestic taxes, stating, "We will tax foreign goods, not the American people, for the benefit of the nation." Declaring an "Inflation Emergency" Federal agencies were directed to implement measures to expand housing supply, reduce healthcare costs, and create jobs while rolling back certain climate policies that have driven up energy and food costs. Withdrawal from the Global Minimum Corporate Tax Agreement Trump rejected the international minimum corporate tax agreement championed by the Biden administration, arguing it lacked formal congressional approval and was non-binding for the U.S. Immigration Policy Southern Border Emergency and Military Deployment Declared a national emergency, deploying armed forces (including the National Guard) to secure the southern border and resuming construction of the U.S.-Mexico border wall. Mass Deportations and Enhanced Enforcement Advocated for the deportation of "millions of illegal immigrants," granting broader enforcement powers to ICE and CBP. Suspension of Refugee Resettlement Paused the refugee resettlement program, ended the "catch and release" policy, and planned to reinstate the "Remain in Mexico" program. Drug Cartels and Gangs Designated as Foreign Terrorist Organizations Groups like MS-13 and Tren de Aragua, along with Mexican cartels, were labeled foreign terrorist organizations, with plans to invoke the 1798 Alien Enemies Act to expel their members. Termination of Birthright Citizenship Issued an executive order ending automatic citizenship for children born to undocumented immigrants or those on temporary visas (e.g., tourist, student, or work visas). Energy and Climate Withdrawal from the Paris Agreement and Expanded Oil and Gas Drilling Reaffirmed the U.S. withdrawal from the Paris Climate Agreement (formal withdrawal requires a year) and promoted offshore and Alaskan oil and gas development, pledging to "drill, baby, drill" and replenish the Strategic Petroleum Reserve (SPR). Ending Wind Energy Projects and EV Subsidies Ordered a halt to large-scale wind energy development and leasing, and terminated electric vehicle subsidies and related emissions exemptions. Gender and Cultural Policies Binary Gender Policy and DEI Program Termination Declared that federal policy recognizes only two genders: male and female. Agencies were instructed to reflect biological sex on official documents, passports, and visas. Additionally, all Diversity, Equity, and Inclusion (DEI) programs within federal agencies were terminated. Federal Government Creation of a Department of Government Efficiency Announced a new "Department of Government Efficiency" led by Elon Musk, with all federal agencies required to establish task forces to streamline processes and cut costs. Mandatory Return to Office and Hiring Freeze Ordered all federal employees to return to in-office work immediately and imposed a 90-day hiring freeze for federal civilian positions, excluding military, immigration, and national security roles. Withdrawal from the World Health Organization (WHO) Ordered the U.S. withdrawal from the WHO and halted funding, though formal exit requires a one-year notice and payment of outstanding dues. Regulation Freeze Directed all federal departments to halt drafting or issuing new regulations pending review by the administration or approval by appointed officials. Other Mass Pardons for January 6 Capitol Riot Defendants Issued broad pardons for individuals involved in the January 6, 2021, Capitol riot, with 14 receiving sentence reductions. TikTok Ban Delayed for 75 Days Directed the Attorney General to delay enforcement of the TikTok ban by 75 days to ensure an orderly resolution while balancing national security concerns with the app's widespread use. Restoration of the Death Penalty Ordered the death penalty to be sought in cases involving the murder of law enforcement officers or violent crimes by undocumented immigrants, citing the need to protect Americans from violence. -- (Photo Credit: Donald J. Trump)
2025-01-21
The transition of power between U.S. presidents has always been a major focus on the political stage and a critical barometer for global financial markets. As Donald Trump returns to the White House on January 20, market reactions to potential policy directions have already been significant. In anticipation of his inauguration, the S&P 500 surged to 6,000, 10-year U.S. Treasury yields climbed to 4.6%, and the Dollar Index approached the 110 mark. These market movements reflect both the uncertainty surrounding new policies and the profound impact Trump’s stance on major domestic and international issues may have. Looking back at the terms of recent U.S. presidents, from economic reforms and geopolitical conflicts to global crises, their strategies have deeply influenced investor confidence and financial market trends worldwide. Below is an overview of the key policies and market performances under recent presidents, along with their broader economic and financial implications: Bill Clinton: From Deficit Reversal to the Prosperous Era of the Internet Frenzy n the early years of his presidency, Bill Clinton enacted the North American Free Trade Agreement (NAFTA) in 1994, creating the largest free trade zone in the world, encompassing the U.S., Canada, and Mexico. On the fiscal front, Clinton faced a $200 billion deficit left by former President George H. W. Bush and implemented measures to cut government spending and raise taxes, transforming the deficit into a surplus. Clinton’s tenure was marked by a booming internet technology sector, driving economic prosperity. By the end of his term, the U.S. economy had grown for 112 consecutive months, unemployment had dropped from a peak of 7.8% to 3.9%, and inflation was maintained between 2–3%. The stock market also surged, with the tech-heavy NASDAQ soaring from around 400 points at the beginning of his term to over 5,000 points. Read more at Datatrack However, Clinton’s presidency was not without challenges. From 1995 to 1996, disputes between Democrats and Republicans over budget planning led to a 21-day government shutdown, the longest in U.S. history at the time. Scandals such as the "Monica Lewinsky affair" almost resulted in his impeachment by the House of Representatives. Additionally, the frenzied development of the internet sector set the stage for the subsequent "dot-com bubble," which began bursting in early 2000, causing the NASDAQ to nearly halve to around 2,700 points by the end of his presidency. Read more at Datatrack George W. Bush: A Turbulent Era of the War on Terror and the Global Financial Crisis Bush’s early presidency faced significant challenges, including the 2001 "dot-com bubble burst" and the 9/11 terrorist attacks. To combat economic recession and rising unemployment, Bush introduced tax cuts totaling $1.35 trillion in 2001 and $350 billion in 2003. Combined with the Federal Reserve’s 11 consecutive rate cuts, these measures facilitated economic recovery, with the S&P 500 rebounding to approximately 1,500 points. However, the recovery was short-lived. The Federal Reserve raised rates from 2004 to 2006 to curb inflationary pressures, tightening the once-lax housing market conditions. Subprime mortgage issues surfaced in 2007, culminating in a global financial crisis by 2008. Major financial institutions collapsed or faced liquidity crises. Despite the Fed’s swift return to rate cuts and the introduction of unlimited quantitative easing (QE), market panic persisted, with the S&P 500 plunging below 800 points. Although the Bush administration collaborated with Congress to implement financial rescue measures such as the TARP (Troubled Asset Relief Program), the U.S. economy remained in deep recession. Read more at Datatrack Barack Obama: The Road to Recovery from the Subprime Crisis and Financial Reform Obama assumed office during the aftermath of the subprime crisis, with a struggling economy and high unemployment. In February 2009, he enacted the $787 billion "American Recovery and Reinvestment Act," which included $286 billion in tax cuts and over $500 billion in government spending to stimulate growth. To prevent future crises, the Obama administration also introduced the "Dodd-Frank Act" in July 2010, strengthening safeguards against systemic risks in the financial sector. Under Obama, the U.S. economy gradually recovered, supported by prolonged low interest rates, QE2, QE3, and fiscal policies. Unemployment fell from a peak of around 10% to 4–5%, while inflation remained controlled. The S&P 500 rebounded from a low of 700 points in early 2009 and reached new highs after 2013. In December 2015, the Fed initiated its first rate hike in nearly a decade, ending a seven-year era of zero interest rates. Read more at Datatrack By the end of Obama’s term, the S&P 500 surpassed 2,200 points, marking a prolonged bull market. Read more at Datatrack Donald Trump: Market Maneuvers Amid Tax Cuts, Trade Wars, and the Pandemic In late 2017, Trump enacted the "Tax Cuts and Jobs Act" (TCJA), the largest tax reform since 1986, lowering corporate tax rates from 35% to 21% and reducing individual tax burdens to spur growth. Meanwhile, Trump’s "America First" policy led to tariffs on major trading partners like China and the EU and renegotiation of NAFTA, culminating in the USMCA (United States-Mexico-Canada Agreement). Despite ongoing U.S.-China trade tensions, the economy grew at a steady 2–3%, with inflation and unemployment remaining stable. The S&P 500 rose to over 3,200 points by 2019. Read more at Datatrack However, the COVID-19 pandemic in early 2020 triggered a global economic crisis, pushing unemployment from 3.5% to 14.8%. Massive fiscal measures, such as the CARES Act, and the Fed’s rapid return to zero interest rates helped markets recover. By the end of Trump’s term, the S&P 500 had climbed back to around 3,700 points Read more at Datatrack Joe Biden: A New Chapter of Governance in Post-Pandemic Recovery and Inflation Challenges Biden’s presidency began during the post-pandemic recovery, with vaccines becoming widely available but economic and public health challenges persisting. His "American Rescue Plan" provided direct payments, unemployment benefits, and business loans to accelerate recovery. Biden also advanced the "Infrastructure Investment and Jobs Act" to modernize infrastructure and create jobs. However, with market demand rebounding, supply chain bottlenecks, and rising global raw material prices, inflation surged significantly in the second half of 2021. To curb overheating inflation, the Federal Reserve began tapering bond purchases at the end of 2021 and initiated quantitative tightening (QT) and a rate hike cycle in 2022. The Biden administration also signed the Inflation Reduction Act to ease inflationary pressures. As a result, concerns over stagflation and economic recession intensified, leading the S&P 500 Index to retreat to around 3,700 points. Against the backdrop of the Fed continuing to raise interest rates to restrictive levels and implementing QT, core inflation gradually fell from its 2022 peak of 6% to over 4% in 2023, with supply-demand imbalances also improving. Despite the restrictive rate environment suppressing market demand, the wealth effect created during the pandemic kept U.S. consumer spending strong, further boosting confidence in a "soft landing" for the U.S. economy. At the same time, the explosion of generative artificial intelligence (AI) in 2023 propelled the S&P 500 Index back above 4,700 points, its pre-rate hike level. Read more at Datatrack Entering 2024, market and labor demand gradually slowed under the influence of restrictive interest rates, but optimism around a "soft landing" persisted. The S&P 500 Index continued to rise to around 5,600 points, driven by the strong performance of AI-related stocks. Although mid-year labor market data cooled, shifting market sentiment toward pessimism, the Federal Reserve initiated rate cuts in September. However, economic data in the following months showed that the labor market remained healthy and consumer spending resilient, leading to renewed optimism in the market. By the end of the year, the S&P 500 Index had surged past the 6,000-point mark. Read more at Datatrack Since the 1990s, U.S. presidents have shaped global financial markets through economic policy, fiscal measures, trade strategies, and monetary policy decisions. From Clinton’s internet boom and free trade to Bush’s response to the dot-com bust and 9/11, Obama’s recovery from the subprime crisis, Trump’s tax cuts and protectionism, and Biden’s post-pandemic initiatives, each administration’s policies have significantly influenced the trajectories of stocks, bonds, and currencies. For investors and the global economy, understanding the dynamic relationship between U.S. presidential policies and financial markets remains an essential and ongoing task.
2025-01-15
With the U.S. Debt Ceiling Reinstated on January 2, 2025, Market Concerns Over Raising or Suspending the Debt Ceiling to Avoid Default Have Intensified. On December 27, Treasury Secretary Janet Yellen sent a letter to Congress warning that the debt ceiling could be reached between January 14 and January 23. If this happens, the Treasury may need to implement “extraordinary measures” and utilize the Treasury General Account (TGA) cash balance to prevent a technical default and another government shutdown. Notably, the Federal Reserve highlighted in its meeting minutes that the reinstatement of the debt ceiling would complicate the assessment of market liquidity and the impact of quantitative tightening (QT) due to the dynamic interaction between TGA balances, overnight reverse repurchase agreements (ON RRP), and bank reserves. In the short term, the U.S. Treasury is expected to mitigate default risks using the TGA account, temporarily alleviating market liquidity pressures. However, once the X-date is reached and large-scale debt issuance resumes, market liquidity will inevitably tighten. If the Federal Reserve has not concluded QT by the X-date, significant liquidity risks may arise. What is U.S. Debt Ceiling? The U.S. debt ceiling, determined by Congress, sets a statutory limit on the federal government’s borrowing to control debt growth. Established in 1917 to manage wartime fiscal spending, it has since been adjusted or suspended whenever the government needs additional borrowing capacity. However, prolonged legislative procedures often delay debt ceiling adjustments, risking a default and government shutdown. To avert this, the Treasury typically employs “extraordinary measures,” using TGA balances to cover government expenditures. Once these funds are exhausted, the government reaches the “X-date,” facing a technical default and a potential shutdown, causing broader market disruptions. Historically, the likelihood of a U.S. technical default has been low. The debt ceiling often serves more as a political bargaining tool between parties than an actual fiscal constraint. For instance, in January 2023, when the debt ceiling was reached, the Treasury deployed extraordinary measures until June, when Congress passed the “Fiscal Responsibility Act” to suspend the borrowing limit. This scenario mirrored the 2017 debt ceiling episode when the Republican-controlled Congress faced a similar situation. Interaction Between the Debt Ceiling, the Federal Reserve’s Liabilities, and QT The debt ceiling’s reinstatement directly impacts the Federal Reserve’s balance sheet, a focal point for investors and policymakers given the Fed’s dual role as a major holder of U.S. Treasuries and executor of monetary policy. The Fed’s balance sheet liabilities can be broadly categorized into three components: Bank Reserves: Funds held by financial institutions in their Fed accounts. Treasury General Account (TGA): The primary account for U.S. government transactions held at the Fed. Overnight Reverse Repurchase Agreements (ON RRP): A monetary policy tool allowing the Fed to sell securities to counterparties and repurchase them later at a higher price. Read more at Datatrack When the debt ceiling is reinstated and remains unchanged, Treasury issuance is constrained. Consequently, excess government spending must be covered through the TGA account, injecting liquidity into the private and banking sectors. This increases bank reserves and could drive funds into ON RRP as investors seek alternatives amid reduced Treasury issuance. Simultaneously, the Fed’s QT program—allowing bonds to mature without reinvestment—reduces market liquidity as primary dealers, banks, and money market funds absorb new Treasury issuances. This combination of QT and the debt ceiling introduces complex liquidity dynamics: while QT tightens liquidity by withdrawing market funds, TGA spending injects liquidity. These opposing forces obscure the true extent of liquidity tightening, complicating the Fed’s assessment of financial conditions. The Fed’s November meeting minutes emphasized that the debt ceiling’s reinstatement would amplify the challenges of evaluating market liquidity dynamics. Practical Impacts of the Debt Ceiling Reinstatement As of now, the TGA cash balance stands at approximately $652.6 billion. If extraordinary measures are activated in the coming weeks, market consensus suggests the X-date will occur in mid-2025. During the initial phase of extraordinary measures, TGA cash outflows will temporarily ease liquidity constraints, reflected primarily in reduced ON RRP balances as Treasury issuance slows. Bank reserves are expected to remain stable at around $3.2 trillion. After the X-date, the Treasury will need to issue significant amounts of debt to replenish TGA balances, reducing bank reserves and ON RRP balances, thereby tightening overall liquidity. If the Fed has not ended QT by this point, liquidity conditions could worsen, heightening systemic risks and the likelihood of market disruptions. This aligns with December meeting minutes showing market expectations for QT to conclude by Q2 2025. Although the Treasury’s use of extraordinary measures and TGA funds may temporarily alleviate liquidity pressures, the significant debt issuance required after the X-date will inevitably draw funds away from the banking system and money market funds, placing downward pressure on bank reserves and ON RRP balances. If the Fed continues QT during this period, the market will face even greater liquidity risks.
2025-01-07
Key manufacturing data from major economies, including the U.S., China, Japan, and the Eurozone, revealed continued divergence in global manufacturing performance in December. While U.S. demand showed signs of recovery with new orders and production returning to expansion, the Eurozone remained mired in contraction due to weak demand and heightened political uncertainty. In Asia, China maintained expansion for the third consecutive month, supported by policy measures, though internal demand stimulation remained limited. Meanwhile, Japan showed optimism for the future despite sustained contraction, and South Korea returned to contraction as both domestic and external demand weakened. United States: Demand Rebounds, but Industry Divergence Persists The U.S. ISM Manufacturing PMI for December rose to 49.3 (prior: 48.4), marking the ninth consecutive month in contraction but also the highest reading in nine months. Sub-indices revealed encouraging trends, with the new orders index climbing to 52.5 (prior: 50.4) and the production index returning to expansion at 50.3 (prior: 46.8). The supplier delivery index also improved to 50.1 (prior: 48.7). Inventory levels rose slightly, with the inventory index at 48.8 (prior: 48.3), while the new orders-to-inventory ratio widened to 5.8 (prior: 1.9), indicating an overall improvement in demand. However, demand conditions varied significantly across industries. While strong demand in computers, electronics, and electrical equipment offset weaknesses in food, transportation equipment, and fabricated metals, the overall recovery momentum remained uneven. Read more at Datatrack Euro Area: Weak Demand and Political Instability Deepen Contraction The Eurozone's December Markit PMI stood at 45.1 (previous 45.2), reflecting further deterioration in new orders and production. The production index posted its largest decline since October 2023, while inventories were depleted at an accelerating pace without signs of replenishment. Employment contraction eased slightly but remained significant, and stagnant input prices led firms to lower output prices further to stay competitive. Germany: The December Markit PMI dropped to 42.5 (prior: 43.0), with political instability and concerns over U.S. tariff policies exacerbating contractions in new orders and production, both hitting their largest declines in 2024. Employment and backlogs also fell amid weakening demand. France: The Markit PMI fell to 41.9 (prior: 43.1), the lowest since May 2020, as political uncertainty following government instability further dampened demand. Companies accelerated inventory reductions, resulting in the steepest decline since 2009, while production and new orders continued to contract. Business confidence remained subdued. Italy: The Markit PMI edged up to 46.2 (prior: 45.5), reflecting weak Eurozone demand alongside high energy costs and intensified competition in the automotive sector. Firms continued to deplete inventories despite modest cost growth, while weak demand pushed output prices lower. Read more at Datatrack China: Third Consecutive Month of Expansion, but Limited Policy Impact on Domestic Demand China’s Manufacturing PMI for December registered at 50.1 (prior 50.3), maintaining expansion for the third straight month but slightly below market expectations of 50.3. Sub-indices showed continued growth in production (52.1, previous 52.4) and new orders (51.0, previous 50.8), driven by policies promoting consumer goods trade-ins and industrial equipment upgrades. However, employment (48.2, prior 48.1) remained in contraction, and the new orders-to-customer inventory ratio fell to 3.1 (prior 3.4), reflecting limited effectiveness of stimulus measures in boosting internal demand. Increased market competition and overcapacity led to further declines in input prices (48.2, prior 49.8) and output prices (46.7, prior 47.7), sustaining deflationary risks. Read more at Datatrack ▶ Read More China's Manufacturing PMI Expands for the Third Consecutive Month in December Japan: Sixth Consecutive Month of Contraction, but Optimism Persists Japan’s December Manufacturing PMI was 49.6 (prior: 49.0), marking six consecutive months of contraction as new orders and production continued to shrink. Despite this, employment growth reached its highest level since April 2024. However, declining backlogs and ongoing inventory reductions indicated persistent demand weakness. The yen's depreciation further pushed up input costs, prompting firms to pass on higher prices to customers, resulting in the fastest output price growth in five months. Nonetheless, businesses remained optimistic about future production expansion, particularly in the automotive and semiconductor sectors. Read more at Datatrack South Korea: Weak Demand and Record Low Business Confidence South Korea’s December Manufacturing PMI fell to 49.0 (prior: 50.6), reflecting weaker domestic conditions and slowing demand from the U.S. and China. New orders and production declined further, while export orders showed only modest growth. Inflationary pressures intensified, and firms raised output prices at the fastest rate since November 2023. Beyond economic challenges, uncertainty over U.S. tariff policies heightened concerns for South Korea’s manufacturing sector. Business confidence for the next 12 months turned negative for the first time since July 2020. Excluding the COVID-19 period, it was the lowest level recorded since the survey began in 2012. Global manufacturing in December continued to show pronounced divergence. In the U.S., manufacturing remained in contraction for the ninth month, but production and new orders returned to expansion, signaling initial signs of a demand rebound. However, industry-specific disparities highlighted uneven recovery momentum. In contrast, the Eurozone faced deepening contraction driven by weak demand and political uncertainty, with Germany, France, and Italy remaining the hardest-hit regions. Meanwhile, China sustained its expansion for the third month, but internal demand stimulation remained limited. Japan exhibited resilience in business sentiment despite prolonged contraction, while South Korea faced mounting challenges with weakened demand and record-low business confidence.
2024-12-26
Since the second half of the year, major global economies have faced varying degrees of inflationary pressure, geopolitical uncertainties, and slowing economic growth. Central banks worldwide have responded by adjusting their monetary policies. Below are the highlights and future outlooks of monetary policy decisions from the six largest economies in December: United States The Federal Reserve (Fed) lowered the federal funds rate by 25 basis points (bps) to a target range of 4.25%-4.50% in its December meeting, aligning with market expectations. In its statement, the Fed maintained the narrative from its September rate cuts but introduced the terms "extent and timing" regarding future rate reductions. This signals a slower pace of easing in 2024, with decisions likely dependent on economic data. Economic forecasts were revised upward, with GDP growth projections for 2024 and 2025 raised to 2.5% (previously 2.0%) and 2.1% (previously 2.0%), respectively. However, the Fed also raised its core inflation forecasts for 2024-2026, citing persistent inflationary pressures and uncertainties stemming from policies introduced by former President Trump. Core inflation is now expected at 2.8% (previously 2.6%) in 2024, 2.5% (previously 2.2%) in 2025, and 2.2% (previously 2.0%) in 2026, with inflation returning to the 2% target only by 2027. The Fed’s dot plot indicates that interest rates will decrease to 3.75%-4.0% in 2025 (previously 3.25%-3.5%), with a further reduction to 3.25%-3.5% in 2026 (previously 2.75%-3.0%). The long-term neutral rate was also revised downward to 3.0%-3.25%. These projections align with market expectations for narrower rate cuts next year. Additionally, the Fed adjusted the overnight reverse repo rate to the lower bound of the federal funds rate, signaling a faster depletion of excess market liquidity. Discussions about ending balance sheet reduction are expected to intensify by Q1 2025. Read more at Datatrack China The People’s Bank of China (PBOC) maintained the 7-day reverse repo rate at 1.5% in December, with the one-year and five-year loan prime rates (LPR) unchanged at 3.1% and 3.6%, respectively, meeting market expectations. Despite the introduction of fiscal policies in May and a comprehensive easing package in September, including cuts to the reserve requirement ratio (RRR), interest rates, and mortgage rates, the impact on consumer and business confidence has been limited. Domestic demand and investment have shown little improvement, with deflationary risks persisting. In response to sluggish demand, the government announced at the annual Central Economic Work Conference that it will adopt more proactive fiscal policies in 2025, raising the fiscal deficit ratio (expected to increase by 1 percentage point to 4%). The government also indicated a shift to "moderately loose" monetary policy, hinting at larger RRR and interest rate cuts next year. Specific policy details remain unclear and are expected to be disclosed during the National People's Congress in March when the 2025 economic growth target is unveiled. Read more at Datatrack Japan The Bank of Japan (BoJ) kept its benchmark interest rate (overnight unsecured rate) unchanged at 0.25% in December. The central bank reiterated its view of moderate economic growth, supported by improved corporate profits, consumer confidence, and steady consumption. Inflation driven by import prices is expected to ease, while a virtuous cycle of wage and consumption growth should lead to moderate inflation increases. The decision to hold rates reflects uncertainties in wage and inflation growth as well as global economic and price outlooks. However, dissent emerged within the BoJ, with one member advocating for a 50-bps rate hike, citing heightened inflation risks, highlighting internal divisions on the inflation outlook. At the press conference, BoJ Governor Kazuo Ueda stated that the central bank would wait for more data on domestic wage growth before considering a rate hike. Ueda noted that clarity on wage trends is unlikely until after spring wage negotiations in March-April, dampening expectations for a January rate hike. Read more at Datatrack Euro Area The European Central Bank (ECB) lowered its deposit facility rate, main refinancing rate, and marginal lending rate by 25 bps to 3.0%, 3.15%, and 3.4%, respectively, in December, aligning with market expectations. The ECB highlighted stronger-than-expected Q3 growth driven by consumer recovery, tourism from the Summer Olympics, and inventory restocking. However, manufacturing weakness, slowing services growth, and increased competition in certain industries have curbed investment and exports. Facing these challenges, the ECB downgraded its GDP growth forecasts for 2024-2026 to 0.7% (previously 0.8%), 1.1% (previously 1.6%), and 1.3% (previously 1.4%). The central bank also removed the phrase "keeping policy rates restrictive" from its statement, signaling potential further easing if growth weakens further. Read more at Datatrack Canada The Bank of Canada (BoC) cut its policy rate by 50 bps to 3.25% in December, marking a cumulative reduction of 175 bps this year, the largest among major central banks. While rate cuts have supported consumer spending and housing activity, business investment, inventories, and exports remain sluggish. Economic growth for Q3 fell below expectations, with a weak outlook for Q4. Additionally, potential tariffs under Trump’s administration heighten economic uncertainty for 2024. Despite these challenges, the BoC emphasized a cautious approach to future rate cuts, suggesting a slower pace of easing next year. Read more at Datatrack Australia The Reserve Bank of Australia (RBA) maintained its cash target rate at 3.25% in December, one of the few central banks to hold rates steady this year. The RBA noted mixed economic activity, with Q3 GDP growth at just 0.8%, the slowest pace since 1990 (excluding the COVID-19 period). However, the RBA expressed confidence in inflation easing, signaling that a rate cut may be imminent. Markets expect the RBA to initiate rate cuts as early as February 2024. Read more at Datatrack Summary In December, global central banks demonstrated cautious approaches to economic outlooks and policy adjustments. The Fed slowed its pace of rate cuts while raising inflation and growth forecasts, reflecting concerns over core inflation and policy uncertainty. China maintained monetary stability amid weak domestic demand and deflationary risks, signaling more aggressive fiscal and monetary measures ahead. The BoJ held rates steady amid internal divisions and wage growth uncertainties. The ECB cut rates and hinted at further easing amid slowing growth. The BoC continued its easing cycle but suggested a slower pace for future cuts, while the RBA held rates steady, with markets anticipating a rate cut next year.
2024-11-20
Since the dawn of human civilization, wealth inequality has been a central issue within societal structures. Despite technological advancements and sustained economic growth driving global prosperity, wealth remains concentrated in the hands of a few, creating a vast disparity compared to the resources held by the majority. Underlying this phenomenon, changes in the economic environment play a critical role. Factors such as asset price fluctuations, inflation, and central bank monetary policies significantly influence the distribution of wealth across households. To provide deeper insights into how macroeconomic factors impact wealth distribution, we examine findings from the European Central Bank’s "Distributional Wealth Accounts for euro area households" report, which highlights the critical role of economic conditions in shaping wealth inequality. Wealth Distribution and Composition in the Euro Area The report reveals stark disparities in wealth distribution across the euro area. According to the data, the wealthiest 10% of households own 56% of the region’s net wealth, while households with wealth below the median hold only 5% of the total. (Source: ECB) A closer examination of net wealth composition shows that as wealth increases, the share of deposits and real estate decreases. Instead, the wealthiest households derive a significant portion of their net wealth from business assets (non-financial business assets and unlisted equity) and financial assets (such as stocks, mutual funds, or insurance products). This composition suggests that wealthier households are generally better positioned to take on greater financial risks compared to less affluent households. (Source: ECB) The Role of Asset Price Fluctuations Differences in asset composition mean that price fluctuations significantly influence wealth distribution. The report indicates that households below the median are more sensitive to changes in housing prices. For these households, wealth is predominantly tied to real estate, which is highly sensitive to interest rate movements. Therefore, shifts in the market or changes in monetary policy—whether tightening or easing—directly affect their net wealth. For example, when housing prices increase by 10%, the net wealth of households below the median can rise by over 10%, while the wealthiest 10% see an increase of only around 5%, as real estate constitutes a smaller share of their overall wealth. (Source: ECB) In contrast, stock price fluctuations disproportionately benefit the wealthiest households. With a larger portion of their wealth held in financial assets, these households are better positioned to capitalize on stock market gains. Data shows that a 10% increase in stock prices leads to a 1.5% to 2% increase in the net wealth of the wealthiest households, while households below the median see almost no benefit. (Source: ECB) Inflation and Monetary Policy’s Indirect Effects on Wealth Distribution Beyond asset prices, inflation and monetary policy indirectly influence wealth distribution. During the pandemic in 2021, all household groups experienced a decline in net wealth, though the decline was smallest for households below the median. This period of rising inflation reduced the real value of liabilities for households below the median, with the reduction in liabilities outpacing the decline in real asset values. As a result, these households saw a net increase in wealth. However, as central banks raised policy rates to curb inflation, the subsequent decline in stock and real estate valuations reduced net wealth across all groups. The impact was more pronounced for lower-income households due to declining real estate prices, while the wealthiest households were more affected by falling financial asset values. (Source: ECB) In summary, wealth inequality primarily stems from differences in the composition of assets and liabilities across households. Net wealth fluctuations are often driven by changes in asset prices, particularly benefiting households with more financial assets. Inflation and monetary policy, rather than directly altering wealth distribution, primarily act as intermediaries by influencing asset price movements. Reference Introducing the Distributional Wealth Accounts for euro area households
2024-11-19
The U.S. credit card debt reached a record high of $1.17 trillion in the third quarter of 2024, with the serious delinquency rate climbing further to 11.1%, according to data from the Federal Reserve Bank of New York. This level significantly surpasses the 9.98% peak witnessed during the pandemic and is approaching the figures recorded during the 2008 subprime mortgage crisis. Does this imply a weakening in U.S. consumer spending momentum or signal that economic deterioration may already be underway? (Source: Federal Reserve Bank of New York, TrendForce) Over the past few years, the post-pandemic reopening released a surge in global demand, which supply chains struggled to accommodate, resulting in soaring prices. The U.S. Consumer Price Index (CPI) experienced a historic peak not seen in over four decades. In response, the Federal Reserve began raising interest rates in March 2022 and initiated quantitative tightening a month and a half later to further restrict liquidity in financial markets and prevent economic overheating. As of today, while inflation growth in the U.S. has almost returned to the Federal Reserve's target range, the average price level remains 20-40% higher than pre-pandemic levels. This has led to worsening financial conditions, diminished consumer confidence, and greater financial strain on many American households in recent years. While credit card debt has reached a record high, it still represents a relatively small portion of total U.S. household debt. According to data from the Federal Reserve Bank of New York, credit card loans account for only 6-9% of total household liabilities, with the largest share coming from mortgage debt, which comprises approximately 68-73%. (Source: Federal Reserve Bank of New York, TrendForce) This implies that a significant economic slowdown or downturn is more likely to occur in scenarios where real estate prices experience a sharp decline or consumers are unable to service their mortgage debt, potentially triggering what is known as a "balance sheet recession." Historical data shows that during the U.S. subprime crisis, the serious delinquency rate for credit card debt rose to 13.7%, roughly two percentage points higher than the current 11.3% level. However, at that time, the bursting of the housing bubble caused widespread mortgage defaults, with the mortgage delinquency rate soaring to 8.9%. Currently, the serious delinquency rate for mortgages remains at a historically low 0.7%. This stability is largely attributable to the fact that nearly 90% of U.S. mortgages are on fixed rates, allowing many homeowners to lock in low rates from the pandemic period, shielding them from the recent rise in interest rates. (Source: Federal Reserve Bank of New York, TrendForce) Moreover, data on the credit scores of mortgage holders indicates that average scores exceed 750, reflecting significantly healthier financial and credit conditions than those observed before the financial crisis. (Source: Federal Reserve Bank of New York, TrendForce) In conclusion, we believe the risk of a broad economic downturn is limited. While credit card delinquency rates have reached historic highs, their impact on overall household debt is relatively minor. Rising credit card delinquencies more likely reflect the difficulties faced by lower-income or lower-credit-score populations in servicing debts amid elevated price levels. The Federal Reserve's recent research also points out that a significant portion of current retail sales growth is driven by higher-income groups. Looking ahead, as the Fed continues to cut rates, credit card interest rates (currently exceeding 20%) and delinquency rates are expected to decline, potentially boosting consumer demand.
2024-11-18
China has yet to shake off the risk of deflation, according to data released by the National Bureau of Statistics on November 9. China's CPI Status China's Consumer Price Index (CPI) rose by 0.3% year-on-year in October, marking a 0.1 percentage point decline from the previous month. On a month-on-month basis, CPI decreased by 0.3%, reflecting a similar 0.3 percentage point drop. Read more at Datatrack Breaking down the components, food prices—a key driver of CPI growth—slowed to a 2.9% year-on-year increase, representing a 0.4 percentage point deceleration. Non-food prices, however, recorded a deeper year-on-year decline of 0.3%, mainly due to falling international crude oil prices. Service-related prices edged up by 0.2 percentage points to a 0.4% annual growth rate, driven by a temporary boost in travel costs during the National Day holiday, but still registered a 0.4% year-on-year decline. Excluding food and energy, China's core CPI rose by just 0.2%, a modest increase of 0.1 percentage points from the previous period. China's PPI Status On the China's Producer Price Index (PPI) side, China's PPI contracted by 2.9% year-on-year in October, with a marginal decline of 0.1 percentage points from the previous month. The month-on-month figure showed a decline of 0.1%, albeit an improvement of 0.5 percentage points. Read more at Datatrack The breakdown indicates that producer prices for means of production remained down 3.3% year-on-year, though month-on-month growth of 0.1% suggests short-term support from recent stimulus measures targeting construction-related industries. Conversely, prices for consumer goods saw a broader decline, with a year-on-year decrease widening by 0.3 percentage points to 1.6%. Among durable goods, the decline in automobile factory prices expanded to 3.1%, while prices for computers, communications, and electronic products contracted by 2.9%. Overall, the impact of China's September monetary easing policies appears limited, as consumer confidence remains weak and spending sluggish. This continued weakness has forced businesses to further lower prices, compressing margins and sustaining deflationary pressures in the economy. The Chinese Government Passes a 10 Trillion Yuan Fiscal Policy A day before the data release, China’s National People's Congress Standing Committee approved a fiscal package totaling approximately 10 trillion yuan. This package aims to raise the annual ceiling for special local government bonds by 2 trillion yuan over the next three years to replace implicit local government debts. Additionally, 800 billion yuan per year over the next five years will be allocated to addressing these hidden debts through special bond issuance. However, these measures primarily address debts accumulated through Local Government Financing Vehicles (LGFVs), which local governments have used to fund infrastructure projects and meet central GDP growth targets. By not appearing on local government balance sheets, these debts have enabled governments to bypass borrowing limits, leading to a massive buildup of hidden liabilities. LGFV bonds are frequently repackaged by banks as high-yield wealth management products sold to domestic investors. Despite the low or even negligible economic returns of many of these projects, investors continue to participate, believing that the central government will ultimately back these debts. This broad participation, often with disregard for moral hazard, has created a scenario likened to a "Ponzi scheme." The impact is clear, the continued downturn in China’s real estate market is pushing the country toward a balance sheet recession, with private consumption and investment constrained by the burden of significant private sector debt repayment. While the government is aware of these challenges, its approach has primarily involved "rolling over old debt with new debt," stalling any substantial economic recovery and hindering effective capital allocation.
As the U.S. presidential election comes to a close, it is all but confirmed that a wave of Republican dominance led by Trump is imminent, driving global capital to flow heavily into the U.S. capital markets to celebrate the election's outcome. However, Trump's victory appears to be a nightmare for Europe. Several ECB officials publicly stated before and after the U.S. presidential election that Trump's win could deliver further blows to both global and European economies. So, what impact could Trump's victory have on Europe? Tariffs First and foremost, the ECB is deeply concerned about Trump's trade policies. During the trade war, economic growth in the eurozone suffered a significant decline. Although Trump may not impose tariffs as high as 60% like those on China, Europe still faces the potential risk of a 10-20% tariff increase. Read more at Datatrack According to 2023 data from Eurostat, the United States is the EU's largest export partner, with exports totaling over €500 billion, accounting for roughly 20% of the EU's total exports. Among these, machinery and automotive exports are particularly vulnerable, with a combined value exceeding €200 billion, while automotive exports alone amount to approximately €40 billion. Over half of these exports come from Germany. (Source: Eurostat) For Germany, which continues to struggle with a manufacturing downturn, Trump's tariff policies could further restrict the development of its automotive sector and exacerbate economic weakness across the eurozone. According to Goldman Sachs, every 10% increase in tariffs could reduce the eurozone's GDP growth by 1%. Defense Spending Beyond trade policy, Trump's foreign policy stance may increase pressure on European countries to boost defense spending. In light of the ongoing Russia-Ukraine conflict, both the U.S. and Europe have been providing military aid to Ukraine. Trump has repeatedly criticized NATO member states for failing to meet the 2% GDP threshold for defense spending and has threatened to withdraw from NATO to pressure member states to increase their defense budgets. (Source: NATO) While increased defense spending may contribute to GDP growth in European countries, the economic multiplier effect of military expenditures is typically lower, limiting its impact on broader economic activity. Moreover, rising defense budgets could worsen fiscal deficits, elevate long-term bond yields, increase borrowing costs, and dampen economic growth. ECB Monetary Policy These factors add to the already fragile economic outlook in Europe, potentially prompting the ECB to adopt larger or faster rate cuts in 2025. This expectation has led to increased market bets on a weaker euro surrounding the presidential election. As of now, the EUR has depreciated from around 1.09 against the USD on November 5 to 1.06. Read more at Datatrack ▶ Read More Trump Policy Quick Guide: How Will It Impact the U.S. Economy? Why Trump Vows to Enact New Tariffs on China, Canada, and Mexico