👉🏻 The latest "non-farm payrolls data" in the United States far exceeded expectations. The market expects that the Fed's pace of interest rate cuts will slow down. Everyone is very optimistic and thinks that the US economy can successfully avoid a recession. Is it about to have a soft landing?
What conditions need to be met before we can consider that the US economy has successfully achieved a soft landing?
💡 There are mainly these indicators:
Inflation rate, unemployment rate, GDP growth rate, investment and consumer spending
The "non-farm data" covers several key factors such as unemployment rate, wage growth, industry health and inflationary pressure, and is closely related to the above-mentioned soft landing indicators.
By tracking the performance of these indicators, we can help determine whether the economy is heading towards a soft landing. Why is the non-agricultural data so important?
1️⃣ Inflation rate:
Fed target: 2%
Current values: 2.2% (overall inflation), 3% (core inflation)
2️⃣ Unemployment rate:
Fed target: 4%
Current value: 4.1%
3️⃣ GDP growth rate:
Fed target: 1.8%
Current value: 2.1% to 2.6%
💡 Another important indicator is “investment and consumption expenditure”:
Full-year growth is currently expected to be around 2.4%, with consumer activity strong due to solid income growth and debt expansion.
While the United States is driving economic consumption through debt expansion, China is showing insufficient domestic demand and is afraid to consume. The confidence of the people in the two countries in the market seems to be worlds apart.
Currently, some developed countries, such as Japan and the United States, have a large middle-class group to support domestic demand.
China has 400 million middle-income earners and 900 million low-income groups. The lack of domestic demand is actually a shortfall of the middle class.
✨ Last words
The United States now has hope of a soft landing and emerging from the shadow of economic recession. So will China follow Japan's old path?
Now everyone seems to like to compare the Chinese economy with Japan. During the 30 years when Japan disappeared, its stock market fell by 73% and its asset prices fell by 83%.
Although the A-share market has been rising sharply in recent days, if China has also recently entered the dilemma of a "deflationary cycle", how much will assets and stock prices fall?
(Deflation cycle: insufficient domestic demand leads to companies being unable to sell their products, companies being poor, which leads to the people being poorer, and then insufficient domestic demand is further exacerbated)
