Latest news with #consumerstimulus
Reuters
01-07-2025
- Business
- Reuters
Trading Day: Sweeping US fiscal bill advances, rate path stays murky
NEW YORK (July 1) - - TRADING DAY Making sense of the forces driving global markets By Lewis Krauskopf, Markets Reporter Jamie is enjoying some well-deserved time off, but the Reuters markets team will still keep you up to date on what moved markets today. We're watching President Donald Trump's tax cut-and-spending bill, which made it through the U.S. Senate on Tuesday and now goes back to the other U.S. legislative body, the House of Representatives. I'd love to hear from you, so please reach out to me with comments at opens new tab Today's Key Market Moves Today's Key Reads Sweeping US fiscal bill moves ahead, rate path stays murky President Donald Trump's U.S. fiscal bill took a key step forward on Tuesday, carrying with it possible risks and rewards for investors. The legislation, narrowly passed by the U.S. Senate, would extend Trump's 2017 personal and business tax cuts, otherwise due to expire at the end of this year, and give new tax breaks in areas such as tipped income and overtime. Investors hope the tax easing might provide stimulus that supports consumer spending. But, according to nonpartisan analysts, the bill would add an estimated $3.3 trillion to the nation's debt. Growing deficits are continuing to cloud financial markets, especially after Moody's cut America's pristine sovereign credit rating in May. The bill still must pass the House of Representatives, where Trump's Republican party holds a slim majority, and it remains to be seen if it will become law by Trump's hoped-for deadline of the July 4 Independence Day holiday. Focus was also on the Federal Reserve, and when the U.S. central bank may next cut interest rates. At a central bank gathering in Portugal, Fed Chair Jerome Powell reiterated the need to understand the impact of Trump's tariffs on inflation before lowering rates. But Powell also declined to rule out a possible rate cut at the Fed's July 29-30 meeting. Markets also seemed to include such a possibility: Fed Fund futures were baking in a roughly 20% chance of a cut at the July meeting, with chances deemed much more likely at the Fed's September meeting. The rate path could become more clear with economic data in coming days, including the monthly U.S. jobs report on Thursday. The dollar, which has fallen steeply this year, edged lower against a basket of major currencies. In a mixed day on Wall Street, the S&P 500 and Nasdaq pulled back from record high levels, while another major U.S. index, the Dow Jones industrial average, moved closer to a record peak. A 5% drop in Tesla shares weighed on the Nasdaq and S&P 500. Trump threatened to cut off subsidies for companies run by Tesla chief Elon Musk, escalating tensions between the one-time allies who have since fallen out. Musk, who spent hundreds of millions on Trump's re-election, had renewed his criticism of the fiscal bill, which would eliminate subsidies for electric vehicle purchases that have benefited Tesla. Tesla shares could get another jolt on Wednesday when the EV carmaker releases its quarterly delivery figures. What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias. Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.
Yahoo
18-06-2025
- Business
- Yahoo
China Consumer Rush for Subsidies Overloads Stimulus Program
(Bloomberg) -- China is testing the limits of what its consumer stimulus can accomplish by subsidizing purchases of select goods, fueling a shopping spree that boosted retail sales growth to the strongest in more than a year but threatening to overwhelm authorities even in the richest regions. Security Concerns Hit Some of the World's 'Most Livable Cities' As Part of a $45 Billion Push, ICE Prepares for a Vast Expansion of Detention Space How E-Scooters Conquered (Most of) Europe JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Consumer participation in the home goods trade-in program has seen provinces quickly running out of funds the national government has so far distributed to pay for the subsidies. Henan and Chongqing have been forced to suspend the granting of subsidies or receiving applications for the handouts, according to recent local government announcements and Chinese media reports, while Jiangsu and Guangdong imposed restrictions on the program such as managing its daily quota. The disruptions are putting Beijing at a crossroads as it looks for a longer-term fix to a crisis of confidence among households. Officials have made expanding consumption their top economic priority this year in anticipation of US tariffs, doubling the amount of ultra-long special sovereign bonds to finance subsidies for the cash-for-clunkers drive from last year to 300 billion yuan ($41.8 billion). Just over half of the total has been distributed or is in the process of being disbursed to local governments. 'The rapid use of the subsidies suggests the program is effective in expanding sales of the products it targets,' said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered. 'However, considering limitations to the country's fiscal capabilities, we still need sustainable measures to carry on the traction in the long-run after sentiment is boosted by the subsidies in the short term,' Ding said. The program has been key to encouraging household purchases of a slew of consumer goods this year. In May alone, home appliances and electronics saw growth in excess of 50%. The trade-in program 'should remain supportive for some durable goods sales,' according to economists at Goldman Sachs Group Inc., who also warned in a note that 'its boost may be disrupted in June due to funding shortages in some regions.' The authorities have said they will distribute a total of 162 billion yuan in two tranches to provinces, with the second allocation announced in late April. Some seven weeks later, the central bank-backed Financial News reported that money is still in the process of being made available to provinces. While the government may soon roll out the remaining funds planned for this year, economists cautioned that Beijing needs to come up with more sustainable measures to put consumption on track to recovery for the long haul. What Bloomberg Economics Says... 'The surprise surge in China's consumption in May is a sign of resilience in an otherwise weak economy. It's by no means a turning point for consumers. A government-sponsored trade-in program for home appliances and electronics drove up retail sales — a spurt that may not last.' — Chang Shu and Eric Zhu. For full analysis, click here Another approach Beijing is taking is relying more on policies aimed at lifting business confidence to encourage private investment and hiring, a shift likely to translate into stronger consumption if sustained over time. Such steps include meeting government arrears to companies and the recent appeal to major electric vehicle makers to make timely bill payments. Unlike the consumer subsidies, such measures offer no quick payoff but could help consumption in the longer term, according to Ding. For now, he expects speedy follow-up subsidy allocations by the national government to 'maintain confidence' since Beijing is front-loading fiscal incentives this year. Concern over reliance on subsidies is also spreading to official circles. A newspaper backed by the State Council, China's cabinet, has said the government 'must improve the income distribution system and try all means to increase income' for residents. 'Boosting consumption cannot just rely on policy stimulus,' according to a front-page editorial carried earlier this month in The Economic Daily. Mounting fiscal stress is another reason why Beijing's options are narrowing. With tax and land sales revenues in decline, Chinese authorities accelerated borrowing in recent years to fund stimulus measures to support the economy. Beijing raised its official fiscal deficit — mostly shouldered by the central government — to the highest level in more than three decades this year, and increased the amount of special sovereign bond issuance to 1.8 trillion yuan, 80% more than in 2024. As a result, China's interest bill is increasing quickly, in turn eroding the government's spending power. But as Donald Trump's tariffs hurt overseas demand and put China's industrial production under pressure, it's unlikely that Beijing will change course on its flagship policy of consumer subsidies any time soon, despite recent hiccups. Some regions may have had to announce a partial suspension of the program after running out of trade-in funds because of promotions offered during the '618' shopping festival, Morgan Stanley economists including Robin Xing wrote in a note. Local authorities may also be attempting to smooth the pace of subsidy rollout and prevent 'arbitrage,' they added, in response to efforts by some retailers to benefit from the consumer subsidies by inflating prices. Cities in at least six provinces including Guangdong and Zhejiang have suspended the trade-in subsidies for cars in part due to official scrutiny over 'zero-mileage' used vehicles. Dealers and traders purchased new cars in bulk, registered them in order to qualify for rebates, then sold them on the used-car market without ever being driven, adding to fiscal pressures and leading to probes by authorities. 'These glitches in the consumer goods trade-in program may be fine-tuned or remedied, but they may also reflect inherent limitations of such stimulus,' the Morgan Stanley economists said. 'Given continued external uncertainty and deflationary pressures, we see a very low risk of the consumer trade-in program being suspended altogether.' (Updates with detail about auto subsidy suspension.) Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Mark Cuban Has Done Sports, Reality TV and Now Health Care. Why Not US President? How a Tiny Middleman Could Access Two-Factor Login Codes From Tech Giants American Mid: Hampton Inn's Good-Enough Formula for World Domination The Spying Scandal Rocking the World of HR Software ©2025 Bloomberg L.P. Sign in to access your portfolio
Bloomberg
17-06-2025
- Business
- Bloomberg
China's Consumer Rush for Subsidies Overloads Stimulus Program
China is testing the limits of what its consumer stimulus can accomplish by subsidizing purchases of select goods, fueling a shopping spree that boosted retail sales growth to the strongest in more than a year but threatening to overwhelm authorities even in the richest regions. Consumer participation in the home goods trade-in program has seen provinces quickly running out of funds the national government has so far distributed to pay for the subsidies. Henan and Chongqing have been forced to suspend the granting of subsidies or receiving applications for the handouts, according to recent local government announcements and Chinese media reports, while Jiangsu and Guangdong imposed restrictions on the program such as managing its daily quota.
