Latest news with #SarahTan
Yahoo
7 hours ago
- Business
- Yahoo
China's ‘Cash-for-Clunkers' Underlines Need for Structural Reform
China's plan to get consumers spending again may be working a little too well. Policymakers' rollout of subsidies for smartphones, home appliances, cars and a host of other products have spurred a long sought-after pickup in spending. But the funds needed to keep it going are running out faster than planned. It Was the World's Coolest Air Conditioner—Until the Mold Recall Anne Wojcicki Wins Bidding for 23andMe The Frenzied Pursuit of Wall Street's Low-Profile All-Stars Walmart and Amazon Are Exploring Issuing Their Own Stablecoins Why Superintelligent AI Isn't Taking Over Anytime Soon Many regional authorities put a brake on subsidies in recent weeks after shopping sprees drained the program's accounts faster than expected. The timing is particularly bad, as a major shopping holiday–'618' –is around the corner. 'Without these incentives, consumer enthusiasm will wane,' said Sarah Tan, economist at Moody's Analytics. She expects the pause on subsidies will dampen retail sales growth. China's state planner has given local authorities roughly half of the annual $42 billion quota for the program, under which consumers get subsidies to trade in used goods for new ones. Analysis by Huaxi Securities shows that over half of the total had been deployed as of May. For the month of June–during the '618' shopping festival–around $7 billion would be needed to sustain the subsidies before they were pulled back, the brokerage said. This suggests that 70% of the planned spending would be expended in the first half of the year. Glitches can be fine-tuned, but they may also reflect the limitations of such stimulus, Morgan Stanley economists said. A similar effort in the U.S.–the 'Cash-for-Clunkers' program to get Americans to trade in old cars–crowded out smaller dealers, distorted the market in favor of subsidized products, and had limited effect on broader spending, they wrote in a note. China watchers have long warned that without accompanying structural reform, subsidies would be at best a temporary fix. The fast depletion of funds suggests the policy win may be even more short-lived than expected. Sales growth in categories such as sports equipment, office supplies, home appliances, and furniture in January-April topped 20% from the same period a year earlier, Goldman Sachs economists calculated. But while shoppers rushed to buy eligible products, tepid national inflation figures signal that consumer sentiment remains subdued amid a protracted property downturn and job market woes. Even if China's central government, which provides the bulk of the trade-in money, beefs up the subsidies, bigger policy moves are needed to keep consumption humming. 'The trade-in scheme is a temporary, bandaid solution…and doesn't address the underlying reason for Chinese households not spending,' said Tan at Moody's Analytics. Better job prospects and a sturdier social safety net are needed to pump up consumer confidence sustainably, economists say. The program is pulling forward purchases, but without a pickup in household incomes, it is 'encountering diminishing returns,' Gavekal Dragonomics' Ernan Cui wrote in a note. It would seem that Beijing agrees. An article over the weekend in the Economic Daily, a newspaper affiliated with China's State Council, called for longer-term reform to improve household incomes and boost consumption. Subsidy stimulus is not aimed at 'emptying wallets' but at helping consumers with purchases, it said. Beijing has made repeated pledges to pivot the economy toward a more consumption-driven model but progress has been slow. Markets will be watching to see what officials do to try to lock in consumer gains. Just extending the subsidies is unlikely to be enough. 'Repeated extensions of subsidies risk creating the worst kind of stimulus program: one that entrenches expectations of permanent fiscal subsidies while producing little change in consumer behavior,' Cui said. Write to Singapore editors at singaporeeditors@ Tax Breaks for 529 College-Savings Plans Expand in GOP Tax Bill The Only Remedy for Intel's Woes May Be a Breakup The World's Largest Meatpacker Finally Makes Its NYSE Debut Stocks Fall, Oil Prices Surge After Israel Attacks Iran Your Electric Bill Is Rising Faster Than Inflation. Here's Why.
CNA
12 hours ago
- Business
- CNA
Philippine central bank to cut key rate on June 19 to support economic growth: Reuters poll
BENGALURU :The Philippine central bank is expected to cut its key interest rate again on Thursday as slowing inflation allows it room to support the domestic economy amid weaker growth, a Reuters poll of economists found. That marks a shift from the April survey when the majority of economists had expected the Bangko Sentral ng Pilipinas (BSP) to keep rates on hold in its June meeting. Inflation slowed to 1.3 per cent in May, the weakest pace in over five years and below the BSP's 2 per cent-4 per cent target range, while first-quarter growth missed expectations despite a surge in public spending. In a June 10-17 Reuters poll, 22 out of 25 economists forecast that the BSP would lower its overnight borrowing rate by 25 basis points (bps) to 5.25 per cent on June 19. The rest expected rates to remain unchanged at 5.50 per cent. "Progress on the inflation front opens the door for the BSP to consider another rate cut," said Sarah Tan, an economist at Moody's Analytics. "Further, the recent stabilisation of the peso will provide an additional nudge to the decision-making process. Continued monetary easing would play a vital role in supporting the domestic economy amid a complex external environment," Tan said. Among those who provided longer-term views, 12 of 23 economists, or over 50 per cent, projected the benchmark rate would fall by another 25 bps to 5.00 per cent by the end of the third quarter. The rest forecast 5.25 per cent. The median view was a cut of 50 bps to 5.00 per cent this year, though economists were divided on where rates would be by end-2025. Governor Eli Remolona signalled in April that more rate cuts were likely. However, some polled economists said the BSP's policy path may be complicated by the U.S. Federal Reserve, which is widely expected to keep rates on hold until September. "While downside risks to both growth and inflation suggest more cuts are Federal Reserve's path will likely play an equally important role in determining the magnitude of rate cuts by the BSP," noted Shreya Sodhani, regional economist at Barclays. "With our U.S. economists now looking for only one cut by the Federal Reserve this year, we think the BSP can ease only twice more while keeping its desired 100 bps differential between its policy rate and the fed funds rate," Sodhani said.
Reuters
12 hours ago
- Business
- Reuters
Philippine central bank to cut key rate on June 19 to support economic growth: Reuters poll
BENGALURU, June 17 (Reuters) - The Philippine central bank is expected to cut its key interest rate again on Thursday as slowing inflation allows it room to support the domestic economy amid weaker growth, a Reuters poll of economists found. That marks a shift from the April survey when the majority of economists had expected the Bangko Sentral ng Pilipinas (BSP) to keep rates on hold in its June meeting. Inflation slowed to 1.3% in May, the weakest pace in over five years and below the BSP's 2%-4% target range, while first-quarter growth missed expectations despite a surge in public spending. In a June 10-17 Reuters poll, 22 out of 25 economists forecast that the BSP would lower its overnight borrowing rate (PHCBIR=ECI), opens new tab by 25 basis points (bps) to 5.25% on June 19. The rest expected rates to remain unchanged at 5.50%. "Progress on the inflation front opens the door for the BSP to consider another rate cut," said Sarah Tan, an economist at Moody's Analytics. "Further, the recent stabilisation of the peso will provide an additional nudge to the decision-making process. Continued monetary easing would play a vital role in supporting the domestic economy amid a complex external environment," Tan said. Among those who provided longer-term views, 12 of 23 economists, or over 50%, projected the benchmark rate would fall by another 25 bps to 5.00% by the end of the third quarter. The rest forecast 5.25%. The median view was a cut of 50 bps to 5.00% this year, though economists were divided on where rates would be by end-2025. Governor Eli Remolona signalled in April that more rate cuts were likely. However, some polled economists said the BSP's policy path may be complicated by the U.S. Federal Reserve, which is widely expected to keep rates on hold until September. "While downside risks to both growth and inflation suggest more cuts are Federal Reserve's path will likely play an equally important role in determining the magnitude of rate cuts by the BSP," noted Shreya Sodhani, regional economist at Barclays. "With our U.S. economists now looking for only one cut by the Federal Reserve this year, we think the BSP can ease only twice more while keeping its desired 100 bps differential between its policy rate and the fed funds rate," Sodhani said. (Other stories from the June Reuters global economic poll)
Bloomberg
14-02-2025
- Business
- Bloomberg
Moody's Economist Who Saw Surprise Philippine Rate Pause Predicts April Cut
The lone analyst who accurately predicted the Philippine central bank's surprise decision on Thursday to maintain its policy rate is forecasting that the pause won't be long and easing may resume as soon as April. Moody's Analytics economist Sarah Tan said the Bangko Sentral ng Pilipinas could cut its key rate at its next policy meeting on April 3, if inflation stays within the central bank's 2%-4% goal and the peso strengthens and holds below the 58 level against the US dollar. The currency closed 0.2% stronger on Feb. 13 to 58.06.
