A $100-trillion economic riddle

INFLATION STAYS LOW AMID GLOBAL EXPANSION

June. That makes Chinese factory price data due on Friday a key gauge on where the reflation story is headed.

“While China is crucial to global inflation trends, there is little to suggest that China will be a major driver of global reflation in the coming 12 months,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

“We expect China’s real estate construction to slow down in the second half of 2017. Combined with remaining excess capacity in China’s heavy industry, this implies reduced support to commodity prices, domestically and internationally.”

Bloomberg Intelligence Chief Asia Economist Tom Orlik was even more definitive: “China’s factory reflation story is over,” he wrote after the Caixin report was released on June 1.

That leaves the reflationary ball back in Trump’s court. The U.S. president has promised to plow ahead with hundreds of billions of dollars in spending on new roads and bridges, funded by the public and private sectors, along with pledges for far-reaching tax reforms.

“What happens next in the U.S. has become critical,” economists at Societe Generale wrote in a recent note. Their verdict: “Trumpflation” will be “insufficient to offset fading Xiflation” — a reference to Chinese President Xi Jinping.

Markets too seem to share that view, with bets on accelerating inflation late last year and early in 2017 now unwinding.

At the same time, upstream pressures continue to build in the U.S. Producer prices there rose a more than forecast 2.5 per cent in April from a year earlier.

Yet, American consumer prices are showing few signs of following the pick up in PPI. The Federal Reserve’s preferred price measure rose 1.7 per cent in April from a year ago, down from 1.9 per cent in March and 2.1 per cent in February. Core inflation — which strips out volatile oil and food costs — also slowed to the weakest annual pace since 2015.

In the euro zone, while producer prices rose 4.3 per cent from a year earlier in May, that pressure has yet to flow through to consumer inflation either. Euro-area inflation decelerated to 1.4 per cent in May — the weakest reading this year — from 1.9 per cent a month earlier.

Those readings will support European Central Bank President Mario Draghi’s argument that it’s too early to commit to an exit from monetary stimulus.

Reflationists argue that trade is improving with the global economy and PPI pressures will keep building. With all the liquidity sloshing around after years of central bank support, it’s just a matter of time until wages and consumer prices head north as well, they say. Problem is, the latest data from around the world just aren’t following that script.

“In many places, upside CPI surprises have turned into downside surprises, and central bankers no longer seem as keen to tighten the screws,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong.

“With China’s construction engine likely to ease back over the coming months, the global reflation risks running out of runway.” estate companies in the top third.

And while the stock performance gap between the two top groups is minimal, the “key point here is that having a meaningful number of women on boards is clearly beneficial,” the report says.

Canadian companies are not bound by quotas, which some countries have adopted to promote corporate board diversity. Provincial securities regulators recently adopted a “comply or explain” regime for firms that are publicly traded, which requires disclosure of board and senior management diversity representation and policies, or an explanation of why none exist.

The federal government is in the midst of making changes to the Canada Business Corporations Act to include similar provisions governing disclosure and discussion of diversity by federally incorporated publicly traded companies.