China's growth impetus stutters

<p>Kia ora,</p><p>Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news China's growth impetus seems to be stuttering.</p><p>But first, and for the first time in more than a year, the <a href="http://www.fao.org/worldfoodsituation/foodpricesindex/en/" target="_blank"><strong>FAO global food price index</strong></a> didn't rise in June, even if the dip was small. However, it is still one third higher than it was a year ago. Almost all the retreat was due to the already sky-high vegetable oils category. There was little relief in any other category with dairy prices up +22% in a year and meat prices up +15% in a year.</p><p>In China their central bank <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4287599/index.html" target="_blank"><strong>cut the Reserve Ratio Requirement</strong></a> over the weekend. This is a cut in the amount of cash that banks are required to hold as reserves, releasing about ¥1 tln yuan (NZ$220 bln) in long-term liquidity back into an economy that does seem to need some stimulus. They say these funds are being directed to aid small business. Even if this is not a major easing, it is a major shift in policy tone.</p><p>Chinese June car sales took <a href="http://www.caam.org.cn/chn/5/cate_39/con_5234192.html" target="_blank"><strong>an unexpected retreat</strong></a>, more evidence of a softening economy. Year-on-year they were down -12% and this is despite a surge in the first few months of 2021. A shortage of computer chips is also likely to have been a factor.</p><p><a href="http://www.stats.gov.cn/tjsj/zxfb/202107/t20210709_1819217.html" target="_blank"><strong>China's consumer inflation rate is slipping</strong></a>, dipping from a modest +1.3% in May to +1.1% in June and another unexpected fall back. This is also consistent with a developing drag in their economy. Consumption isn't driving growth yet. (Also not