“China’s car sales declined for a 12th consecutive month, a historic slump that’s left manufacturers reeling as trade tensions and economic worries weigh on consumer sentiment.
“Retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles fell 12.5% to 1.61 million units in May, the China Passenger Car Association (CPCA) said Tuesday. That followed a 16.6% decline in April and a 12% drop in March.
“The unprecedented slide has hit local brands particularly hard, though sales of market leader Volkswagen AG have also waned this year. While China this month unveiled a stimulus plan to help spur car demand, the policies don’t include any new spending from the central government and were met with doubts that they are enough to revive sales.”
“After a decade-long real estate boom, home prices in many Chinese cities are unnaturally high. In Beijing and Shanghai, buying a home costs about what the average family would earn in 23 years if it spent none of its income.
“And in 2016, Chinese residents began splurging on borrowing, most of it in the form of mortgages—as well as untold sums of high-interest personal loans—to buy increasingly pricy homes.
“With somewhere around $6.8 trillion in personal debt, with most wrapped up in real estate, the risks of a sharp drop in prices setting off a financial crisis akin to that of the US or Spain in 2008 are rising.”
“China’s factory inflation slowed in May as faltering manufacturing hit demand, reinforcing worries about cooling growth in the world’s second-largest economy, while a surge in food prices could add to consumer grievances about living costs.”
“Japan is fumbling what looks like its last chance to avoid an unnecessary and economically damaging sales-tax hike.
“The country’s ruling Liberal Democratic Party published its policy priorities for a July election to the upper house of Japan’s legislature on Friday, including a fresh commitment to increase the tax to 10% from 8% in October.”
“South Korea’s exposure to a stressed global manufacturing supply chain has knocked its currency – Asia’s most risk sensitive – to over two-year lows as investors use it as a proxy to bet on the economic costs of a protracted U.S.-China trade war.”
“Passenger vehicles sales in India recorded the worst monthly slump in 18 years in May, as a prolonged slowdown gripped the automobile industry amidst a credit crunch.
“Automotive demand in India has been cooling since July as the country faced a credit crunch and distress in rural markets.”
“Pakistan is flirting with a textbook emerging-market crisis. An unsustainable investment boom has ended. The central bank has raised interest rates to squeeze a current account gap.
“Growth has collapsed to a nine-year low; youth unemployment is in double digits; and inflation is getting there. Government revenues are stalling.”
“An article in Foreign Policy authored by the Muslim Brotherhood’s former minister of investment Yehia Hamed has said that the chronic mismanagement of public finances by the current administration in Egypt has meant that in the last five years external debt has risen fivefold and public debt has more than doubled.
“The government currently allocates 38 percent of its entire budget merely to pay off the interest on its outstanding debt. Add loans and instalments, and more than 58 percent is eaten up,” writes Hamed.”
“European businesses are increasingly anticipating a recession in the near future as bad debt losses showed a marked increase in 2018.
“Companies reported 2.31% in bad debt losses in 2018 as a share of total revenues, an increase from 1.69% in 2017, according to a report from Swedish debt purchaser Intrum.”
“European industry is in trouble and there’s a risk it will infect other parts of the economy, deepening the slowdown that’s already left the region fragile.”
“Tensions are running high after the European Commission warned last week it was ready to take disciplinary action against Italy for consistently breaching the EU’s debt rules and flouting warnings to cut its deficit and reduce its public debt…
“The commission in a June 5 report highlighted the fact that Italy is not expected to meet its debt reduction targets in 2019 or 2020.”
“There is a dirty little secret in economics today. The United States has benefited – and continues to benefit – from the global slump.
“The US economy is humming along, even while protesters in the United Kingdom hurl milkshakes at Brexiteers, French President Emmanuel Macron confronts nihilist yellow-vested marchers, and Chinese tech firms such as Huawei fear being frozen out of foreign markets.”
“The risks to the global economy are not limited to China and western Europe. The Argentine, Turkish, and Venezuelan economies are all in the grips of accelerating currency crises. The new Brazilian government is showing increasing signs of being unable or unwilling to address the country’s serious public finance problem. Also casting a dark cloud over the global economy are the rising geopolitical risks from countries like Iran and North Korea.
“Seemingly oblivious to the lessons from the collapse of Lehman Brothers during the 2008 financial crisis, Trump appears to think that the US economy is insulated from the rest of the world economy and is immune from a global financial market meltdown.”
“After overcoming significant political and economic headwinds during the past decade, the US economy now appears to have undergone its longest sustained expansion in history.
“Yet, behind the data showing historically low unemployment and long-awaited wage growth lie vulnerabilities that cannot be ignored.”
“The U.S. stock market has been surprisingly resilient in recent months despite signs that the U.S. economy is slowing.
“Behind the lofty broad market averages, however, disagreements are intensifying about the value of individual stocks, an indication that the overall outlook is increasingly uncertain.”
“The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder.
“Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt. At issue is the $1.3 trillion leveraged lending market, composed of high-yield loans from firms with some of the weakest finances.”
“The shale boom, along with slowing energy demand growth in much of the industrialized world, has changed the global oil and gas business.
“Rising productivity in areas such as the Permian and Appalachian basins has been a deflationary force rippling out across the industry, forcing producers everywhere from Canada’s oil sands to Brazil’s deepwater fields to cut costs.”
“A top financial regulator is opening a public effort to highlight the risk that climate change poses to the nation’s financial markets, [arguing] that the financial risks from climate change were comparable to those posed by the mortgage meltdown that triggered the 2008 financial crisis.”
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