I’ve had continuous rain for the last 3 days so I’m officially declaring Summer 2024 to be over. With that out of the way, let’s take inventory of what transpired these last 3 months. Four main events defined the period:
1. China’s Limited Economic Output
The summer was marked by disappointment in China’s economic activity, as the leadership delivered little substance at the Communist Party’s third plenum. This event dashed the hopes for significant economic stimulus and reforms, leaving markets pessimistic about China’s ability to spur growth. Despite high expectations, the lack of robust action from Chinese policymakers failed to alleviate concerns about China’s domestic demand and long-term economic trajectory.
Key Data:
- China’s Consumer Price Index (CPI) rose by 0.6% year-over-year in August, slightly below the expected 0.7%.
- Producer Price Index (PPI) fell by 1.8%, worsening from a previous 0.8% decline.
- Deflationary pressures remain strong in China, increasing the likelihood of further policy support.
These weak economic indicators suggest that deflationary pressures are still significant in China, which strengthens the case for more policy intervention. However, confidence in the Chinese economy remains low, with a large portion of Chinese exporters keeping revenues abroad, reflecting a reluctance to invest domestically.
2. Deflation of the Artificial Intelligence (AI) Bubble
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