00:00Mark Ostwald is Chief Economist and Global Strategist at ADM Investor Services International.
00:07It is a slight rise. The major upward pressure is still coming from things like travel services,
00:14but there's a big drag still coming from food, which was down 2.7 year on year.
00:20Services prices, core CPI around 0.9, that is an improvement, but it is very, very marginal.
00:29And the concern is really more with the producer prices, because that came as much as it's risen
00:36to minus 2.5 and minus 2.8. The base effects from last year should actually see it being boosted
00:44to hopefully positive territory by June, given that we got to a low point of minus 5.4 a year
00:51ago. So it really still shows to me that demand is still pretty soggy. You also saw this in the
01:04consumer lending data, new yuan loans up 9.6 year on year, but coming in below expectations
01:12and aggregate social financing also, whereby if you break it out, you can see that the consumer
01:17demand for credit is really dropping off quite substantially from its previous peak, and that's
01:24mostly related to the housing market. OK, well, maybe let's touch on the producer prices in just
01:29a moment. Turning back to consumer prices and consumer confidence, how important is that for
01:35the economy? I think it's very important. There needs to be more confidence that the housing
01:43market has reached the trough and is turning around, and at that point you will start to see
01:49the demand for lending, above all mortgages, start to improve. It's not a question of interest rates,
01:57though. It is a question of a sense amongst consumers and indeed amongst businesses that
02:04both residential and commercial real estate, you know, the problems there for the developers
02:11are being resolved, even if it's going to take some time. And I don't think that confidence is
02:16quite there yet. And as you said, producer prices, they dropped 2.5% in April from a year earlier,
02:22less than or less of a slide than a month before, but it's still a decline. However,
02:27there is concern, isn't there? Soggy demands. What else does that figure tell us?
02:34Well, to me, in part, it also reflects the weakness that we've had in iron ore and steel
02:39prices, which again plays back into the whole property sector. There are other parts of it
02:45which are quite strong in terms of anything related to the energy transition and to high tech,
02:52and we should hopefully, in coming months, given the relative shortage that there is there in the
02:59copper market, see a boost coming from anything, you know, which is related to high tech, to the
03:06energy transition for the primary metals and electric vehicles. So, you know, that should
03:14start to improve, but it's still overall, it still suggests that there needs to be more done,
03:22and it needs to be far more targeted probably than wholesale. In other words, a cut in interest
03:28rates at this week's medium term lending facility monthly operation is probably not going to change
03:35much. It really needs to, you know, this whole issue of ring fencing new property developments,
03:43so people feel confident that they are not going to suddenly find that the development
03:49is going to be stopped because the developer is in trouble, really needs to get more traction.
