The Guardian - China-China falls deeper into deflation territory hitting markets as UK house asking prices drop business live

The jump in UK companies going bust is proving lucrative for insolvency experts Begbies Traynor.

Begbies Traynor has reported that revenues grew by 13% in the six months to 31 October, while adjusted profits rose 10%.

Begbies said the number of businesses going insolvent in the UK rose by over 17% to 24,326 in the year to the end of September – which is generating more work for its insolvency team.

It told shareholders:

We anticipate that activity levels in our largest service line of insolvency will continue to increase in tandem with the indicators of corporate financial stress in the UK, resulting from the current interest rate and inflation environment.

This gives the board confidence that the insolvency team will continue to deliver growth through the second half of the current year and thereafter.

The London stock market is open…. and mining stocks are falling, as investors fret about the weakness of China’s eocnomy.

Anglo American are the top faller on the FTSE 100 share index, down 2.2%, extending Friday’s 19% tumble after the company revealed plans to slash mineral production to cut costs and lift profitability.

That’s despite speculation by analysts that Anglo American faces a possible takeover or merger approach.

Glencore (-1.5%), Fresnillo (-1.4) and Rio Tinto (-1%) are also in the FTSE 100 top fallers.

Hong Kong’s Hang Seng index has also been hit by deflation jitters, down over 1% in late trading.

Stephen Innes, managing partner at SPI Asset Management, says:

Hong Kong stocks remain entrenched in a prolonged decline, hurt further by a significant drop in consumer prices in China, marking the steepest decrease in three years.

This development has intensified worries about potential deflation impacting corporate earnings and profit margins, dragging down the region markets in a negative feedback loop.

The UK’s housing market is also undergoing a bout of deflation.

Rightmove has reported that the average asking price of a UK home tumbled by nearly £7,000 in December, to £355,177, a drop of 1.9%.

Rightmove also reports that average asking prices set by new sellers are 1.1% lower than a year ago, with the number of sales agreed this year around 13% lower than the same period in “the more frenetic” 2022.

Prices in seven out of 11 regions are higher than a year ago, Rightmove reports, adding:

The North West leads the way, up by 1.5% compared to last year, while the South East is the worst performer at 3.7% below 2022.

Here’s the full story:

Tim Bannister Rightmove’s Director of Property Science, has said:

“2023 has been an interesting year, with very little straight forward, yet far from the negative market it might have been given the broader economy.

Whilst there has been a lower transaction level than the previous few years and some adjustment in values, attractively priced property is selling. Very prime coastal property has held firm and sold well and sensible sellers who are realistic about guide prices are achieving positive results. There is less risk taking and the fluctuation of mortgage rates has made it a bumpy road for some, but as we turn towards 2024, we are hopeful that activity will continue despite a general election.

Our advice to both buyers and sellers is to be realistic with expectations, it is potentially an easier market for buyers in prime areas with more choice and less pressure. Vendors; get organized, take early interest seriously and above all pitch values at an attractive level from the outset.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

While most of the advanced world is struggling with inflation, China has the opposite problem.

The world’s second-largest economy has dropped further into deflation territory, with consumer prices falling last month, new data released last weekend shows.

China’s consumer price index (CPI) dropped 0.5% on a monthly basis in November, showing that prices of a basket of goods and services fell compared with October.

CPI was also 0.5% lower on an annual basis, China’s National Bureau of Statistics (NBS) reported, which is the steepest drop since November 2020.

The drops have disappointed investors, as they indicate rising deflationary pressures as domestic demand remains subdued.

Kyle Rodda, senior financial market analyst at capital.com, says:

Chinese stocks have sunk as investors digest the weekend’s disappointing price data. Deflation is deepening, and while debate rages about why, the trend is undeniable: consumer prices are falling, and producer prices have been negative for more than a year. The data simultaneously indicates anaemic demand and the eroding profitability of Chinese companies.

The latest pledges of deeper fiscal support from last week’s Politburo meeting have amounted to little and may be considered insufficient to spark the economy out of this rut.

China has already dropped into deflation back in August, before prices rose again in September – but that recovery proved temporary, with prices also having dropped in October.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said deflationary pressures have increased because of weak domestic demand, adding:

“This highlights the importance of more supportive fiscal policy.”

In another sign of deflation, China’s manufacturers are cutting prices too. China’s producer price index fell 3% year-on-year, compared with October’s 2.6% drop, which is the 14th decline in a row.

The data, released last weekend, has knocked stocks today. China’s CSI 300 index, which tracks stocks on the Shanghai and Shenzen exchanges, fell as much as 1.4% today.

But the economic picture may be brightening in the UK, after a troubled year.

Manufacturing body MakeUK has reported a pick-up in business confidence.

And encouragingly, manufacturers reported that export orders surpassed domestic orders for the first time in four years. That suggests that companies are taking advantage of either faster growing or new markets.

Fhaheen Khan, senior economist at Make UK, said:

“After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers.

While growth is not exactly supercharged, the positive announcements in the Autumn statement can at least allow companies to plan with more certainty without having to constantly fight fires.”