China's Producer Deflation Eases Amid Price Control Efforts, Consumer Prices Drop

Economic

Summary:

China's producer deflation showed signs of easing in August, reflecting the success of Beijing's efforts to curb excessive competition and price cuts in key industries...

Producer Deflation Eases, But Full Recovery Remains Elusive

China's producer price index (PPI) declined by 2.9% year-on-year in August, narrowing from a 3.6% drop in July. This marks an improvement in the country's ongoing battle with deflation in its industrial sectors, where overcapacity and intense price wars have long been a drain on manufacturers' profits. Economists had expected a similar 2.9% drop, signaling that Beijing's recent crackdown on aggressive pricing strategies in key sectors, like the auto industry, is beginning to show results.

"Effects of 'anti-involution,' which started in June-July, are starting to be felt," said Xu Tianchen, senior economist at the Economist Intelligence Unit. However, Xu also noted that the upturn in producer prices is still far from a full recovery, citing the persistence of capacity restrictions and a global economic slowdown.

Despite this, manufacturers in China remain under pressure due to weak consumer confidence and ongoing uncertainties, including U.S. trade policies. The easing of factory-gate deflation is still far from signaling a full return to inflationary conditions, as significant structural challenges persist.

Consumer Prices Fall as Food Volatility Worsens

On the consumer side, the Consumer Price Index (CPI) fell by 0.4% year-on-year in August, a faster decline than expected and the most significant drop in six months. The primary factor driving the negative CPI was volatile food prices, which fell by 4.3% in August, worsening from a 1.6% decline in July. This marks a further decline in China’s consumer sector, which is struggling under weak demand and ongoing economic pressures, including a cooling property market and the drag of U.S. tariffs on exports.

Despite the negative CPI, the core inflation rate—excluding volatile food and energy prices—rose by 0.9% in August, accelerating from 0.8% in July. This signals that demand stimulus efforts by the government, such as subsidies and targeted consumer loan programs, have had some success in propping up prices, though they remain far from reaching China’s inflation target.

Policymakers Focus on Stimulating Demand

In an attempt to combat weak consumer demand, the Chinese government has rolled out several stimulus measures, including interest subsidies for personal and business loans in sectors like catering and tourism. These measures aim to encourage borrowing and spending, helping to support economic recovery in the face of ongoing deflationary pressures.

However, despite these efforts, analysts caution that the road to a fully revitalized economy remains challenging. Weak domestic consumption, compounded by external challenges such as global economic uncertainty and U.S. tariffs, means that China’s recovery may be slow and uneven, with full reflation still some way off.

While the easing of producer deflation in China represents some progress, the country’s economic recovery remains hampered by weak consumer demand and global uncertainties. Despite government stimulus measures, the path to sustained economic growth appears challenging, and the broader effects of U.S. trade policies, along with internal economic restructuring, will likely continue to shape the outlook for China’s economy in the near future.

Source: Reuters

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Winkelmann

Economic

Political

Forex

A judge temporarily blocked President Donald Trump from removing Federal Reserve Governor Lisa Cook, allowing her to remain on the job as she challenges the president’s efforts to oust her over allegations she committed mortgage fraud.In an early win for the embattled economist, US District Judge Jia Cobb in Washington granted Cook’s request to continue working for now. The ruling means Cook can likely attend a highly anticipated Fed policy meeting Sept. 16-17 to vote on whether to lower interest rates.

The Justice Department is likely to swiftly appeal the ruling and the US Supreme Court may ultimately have the final say.The judge concluded that the alleged mortgage misconduct likely didn’t amount to “cause” to fire her under the Federal Reserve Act, and that the way in which she was dismissed likely violated her due process rights under the Constitution.

“The best reading of the ‘for cause’ provision is that the bases for removal of a member of the Board of Governors are limited to grounds concerning a Governor’s behavior in office and whether they have been faithfully and effectively executing their statutory duties,” the judge wrote.Cook’s lawyer Abbe Lowell said in a statement that Cobb’s decision “recognizes and reaffirms” the Fed’s independence from political interference.“Allowing the president to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law,” Lowell said.

A Fed spokesperson declined to comment. The agency hasn’t taken a side in the legal fight and has said it will respect the court’s decision.The Justice Department said that it doesn’t “comment on current or prospective litigation including matters that may be an investigation.”The White House didn’t immediately respond to a request for comment on the decision Tuesday evening.

Mortgage Fraud Allegations

Trump said last month he was firing Cook after Federal Housing Finance Agency Director Bill Pulte accused her of fraudulently listing homes in Michigan and Georgia as a “primary residence” when she obtained mortgages in 2021 to secure more favorable terms on loans. Pulte later added a claim involving a third mortgage in Massachusetts.

The fight over whether Cook can keep her job has quickly emerged as the main flash point in Trump’s bid to assert more control over the Fed, which he has repeatedly called on to lower interest rates. In her lawsuit, Cook’s lawyer cast his attempt to fire her as a power grab that could cause “irreparable harm” to the US economy. Her lawyer has also said she never committed mortgage fraud.Cook has alleged that Trump’s move to oust her is part of a politically motivated pattern. The president had previously considered an attempt to force out Fed Chair Jerome Powell after attacking him for not moving quickly enough to reduce interest rates.

Unintentional ‘Clerical Error’

Her lawyers said that if there were any errors, she didn’t mean to deceive anyone, and no one was harmed. They have also suggested that an unintentional “clerical error” may be to blame and that the allegations were a pretext by Trump to remove her.Following Pulte’s allegations, which he referred to the Justice Department, Trump wrote a letter to Cook saying that he was removing her immediately in light of her “deceitful and potentially criminal conduct in a financial matter.”Meanwhile, the Justice Department has opened a criminal probe into whether Cook committed mortgage fraud.

In the ruling, the judge said that Pulte’s allegations in a social-media post, and Trump’s later social media post announcing his intention to dismiss Cook, didn’t amount to a proper notice of the allegations against Cook.Cobb denied a request by the Justice Department to pause her ruling while it pursues an expected appeal, immediately teeing it up for the administration to take the case to higher courts.Cobb also agreed for now that the public interest in Fed independence “weighs in favor of Cook’s reinstatement.” That independence is critical in helping the nation’s “banking system to promote stability,” Cobb said.

Source: Yahoo Finance

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Daily News

[Quick Facts]

1. U.S. employment data was revised downward significantly, showing 911,000 fewer jobs added through March.

2. Qatar's Prime Minister Al-Thani: No Agreements remain after the Israeli attack.

3. White House urges Congress to pass a temporary spending bill to avoid a government shutdown.

4. EU Member States are divided over sanctions against Israel, unable to take action.

5. French Prime Minister Bayrou submits resignation.

[News Details]

U.S. employment data was revised downward significantly, showing 911,000 fewer jobs added through March

The U.S. government said on Tuesday that the economy likely added 911,000 fewer jobs over the 12-month period through March than previously estimated, signaling signs of stagnation in job growth even before former President Trump implemented aggressive tariffs on imports. Economists had expected the Bureau of Labor Statistics (BLS) to revise downward the level of employment between April 2024 and March 2025 by 400,000 to 1 million jobs. Previously, the employment level for the 12-month period from April 2023 to March 2024 had already been revised down by 598,000 jobs.

This benchmark revision follows another report released last Friday showing that job growth nearly stalled in August, while June marked the first monthly decline in employment in four and a half years. In addition to being weighed down by uncertainty over trade policy, the labor market has also faced pressure from the White House's tighter immigration policies, which have reduced the supply of workers. At the same time, businesses' shift toward artificial intelligence tools and automation is dampening demand for labor. Economists believe the downward revision to job growth data will have a limited impact on monetary policy. The Federal Reserve is expected to resume interest rate cuts next Wednesday after pausing its easing cycle in January due to uncertainty related to tariff impacts.

Qatar's Prime Minister Al-Thani: No Agreements remain after the Israeli attack

Qatar's Prime Minister Al-Thani stated on September 9th that Israel's attack on the residence of a Hamas political bureau member in Doha violates international law and moral norms. He pointed out that the United States notified Qatar just 10 minutes before the strike that Israel was about to carry out the attack, and that Qatar had no prior knowledge or intelligence about it. "Qatar... reserves the right to respond to this blatant attack," Al-Thani claimed. Qatar has formed a legal team to prepare a response to the Israeli attack at the legal level. Also, Qatar won't turn a blind eye to Israel's actions. All necessary measures must be taken to stop Netanyahu's madness.

Al-Thani noted that the Israeli prime minister is pushing the region toward an irreversible situation. He also emphasized that Qatar has done everything possible to advance ceasefire negotiations in Gaza, but now Israel has undermined the chances of reaching an agreement. Al-Thani said no agreement remains after today's attack.

White House urges Congress to pass a temporary spending bill to avoid a government shutdown

The White House Office of Management and Budget urged Congress to pass a temporary spending bill to prevent a government shutdown on October 1st and extend funding availability until January 31st. Draft documents from the budget office include requests for specific funding increases, such as for Columbia-class submarines, and allowing the District of Columbia to use its own tax revenues. Leaders of the appropriations committees had previously discussed a shorter-term temporary measure lasting until November.

EU Member States are divided over sanctions against Israel, unable to take action

On September 9th, local time, EU High Representative for Foreign Affairs and Security Policy Kaja Kallas stated during a debate in the plenary session of the European Parliament. She said the European Commission is prepared to suspend trade relations with Israel and terminate research partnerships, but national governments are blocking further measures. The options for the EU to take additional action are clear and still under discussion, but member states are divided on how to compel the Israeli government to change course. Kallas said the Union cannot act unless the member states agree on action.

French Prime Minister Bayrou submits resignation

On September 9th, French Prime Minister François Bayrou submitted his resignation to President Emmanuel Macron. Bayrou's government failed to secure a majority in a vote of confidence in the National Assembly, receiving only 194 votes in favor and 364 against. The Elysée Palace announced that Macron will appoint a new prime minister within the coming days. Bayrou is the second French prime minister to resign in just over nine months and the fifth in less than two years.

[Today's Focus]

UTC+8 19:45 Speech by Swiss National Bank President Martin Schlegel

UTC+8 20:30 U.S. August PPI

UTC+8 22:00 U.S. July Wholesale Sales Monthly Rate

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MarketPulse by OANDA Group

Forex

Technical Analysis

Economic

Some contradicting headlines are influencing the US Dollar in a battle of wits right ahead of quintessential inflation data.Markets have been unable to provide a clear answer on how the upcoming FOMC (September 17th) and its rate cut expectations will affect the future outlook for the Dollar.The thesis had been that despite negative news (Jerome Powell’s change in tone at Jackson Hole or the recent Non-Farm Payrolls), traders have failed to sell the US Dollar convincingly, with the DXY doomed in sideways action.

The freshly released downward revisioned BLS report (bearish for the USD) and the rising tensions in the Middle East with Israel-Hamas war taking another turn (bullish for the USD) are once again prevented a clear path ahead for the Greenback.However, some interesting technical patterns might be getting into play as we approach the surely decisive pair of inflation reports in the US PPI (8:30 E.T. tomorrow) and Thursday’s CPI report.

Let’s take a look at the Dollar Index.

How could the data influence the US Dollar? Potential reactions

The upcoming PPI report should bring back memories of the previous humoungous beat in the past month (0.9% vs 0.2% exp) pushing inflation expectations higher for the consecutive University of Michigan surveys (the FED hates that).This comes as Participants started to be less and less cocnerned by tariffs and their impact.Despite hurting producers before consumers, fears are that Producer Prices increases will repercutate in upcoming CPI releases, highlighting Thursday’s number even more.

A relatively weak PPI could help to support current sentiment quite largely, indicating that the past month increase was just a one off – This should support a 50 bps cut further (Dollar down).

However an upward beat should do just the reverse and add to the anxiety (Dollar up)

CPI will really be in focus however as Participants look to see if the higher producing costs have started to bite in consumers pockets.Reactions should be similar to the PPI, but their extent could be much larger: A higher inflation for Consumers should prevent a 50 bps entirely, towards more gradual cut and spark stagflation fears.

US Dollar could hence maintain its sideways movement.

Dollar Index intraday outlook

Dollar Index 4H Chart

Dollar Index (DXY) Faces Key Test From Upcoming PPI And CPI – Potential Reactions_1

US Dollar Index (DXY) 4H Chart, September 9, 2025 – Source: TradingView

Last week’s data has brought some renewed selling momentum as bears have managed to form a downward tight bear channel (bear candles overlapping each other).The weekly open hence formed a small gap to test the July support/pivot zone, and this morning of action actually saw a decent rebound, undoing some of the bear advantage.Arriving at a key technical standpoint, bears entering here could take the hand by rejecting the 97.60 to 97.80 range lows (break-retest style).

Keep in mind that action will be swift tomorrow (expect spikes) and prices may just dawdle around until then.

Key levels of interest for the Dollar Index:

Support Levels:

● 97.40 to 97.80 Range Support (currently getting tested)

● Last Pivot before run-higher 97.15 Zone acting as Key Support

● 2025 Lows Major support 96.50 to 97.00

Resistance Levels:

● 98.00 Mid-Range pivot

● 98.50 to 98.80 Resistance Zone

● Mid-line of the ascending channel and psychological level 99.50

● 100.00 Main resistance zone

Dollar Index 30m Chart

Dollar Index (DXY) Faces Key Test From Upcoming PPI And CPI – Potential Reactions_2

Dollar Index (DXY) 30M Chart, September 9, 2025 – Source: TradingView

Looking closer to the short-timeframe, the support zone that is currently trading will be a major test for bulls.Managing to hold the lows of the current support (97.40, immediate short-term support) would indicate balanced action, which would be more in the bulls favor after failing to hold lower.On the other hand, sellers appearing at the immediate short-term resistance (97.70) could trigger break-retest selling reactions.

A breakout in any direction should see continuation.

Source: MarketPulse by OANDA Group

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Risk Warnings and Disclaimers

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Alice Winters

Gold prices spiked then sold off sharply after the preliminary revisions to U.S. employment subtracted nearly one million jobs – three times lower than the 10-year average and the worst print on record.

The preliminary estimate of the Current Employment Statistics (CES) national benchmark revision to total nonfarm employment for March 2025 is -911,000 (-0.6 percent), the U.S. Bureau of Labor Statistics (BLS) reported today.

The revision is 300% worse than the average over the last decade, the BLS said. “The annual benchmark revisions over the last 10 years have an absolute average of 0.2 percent of total nonfarm employment,” they wrote. Before today, 2009 saw the largest downward revision with 902,000, but today’s number is now the worst in the series’ history.

Gold prices saw significant volatility around the employment revision release, which is often a non-event, but which has added importance this year following the massive downward revisions over the previous quarter.

Spot gold spiked to a session high of $3,674.69 in the moments after the 10 am EDT release, but fell all the way to $3,643 less than ten minutes later.

Spot gold last traded at $3,651.42 per ounce, and remains up 0.43% on the daily chart.

Each year, CES employment estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW). These numbers are derived primarily from state unemployment insurance (UI) tax records.

“The preliminary benchmark revision reflects the difference between two independently derived employment counts, each subject to their own sources of error,” they said. “It serves as a preliminary measure of the total error in CES employment estimates from March 2024 to March 2025.”

The BLS said that preliminary research indicates that the overestimation of employment growth was “likely the result of two sources—response error and nonresponse error.”

“First, businesses reported less employment to the QCEW than they reported to the CES survey (response error),” they wrote. “Second, businesses who were selected for the CES survey but did not respond reported less employment to the QCEW than those businesses who did respond to the CES survey (nonresponse error).”

The final benchmark revision will be incorporated into official estimates with the publication of the January 2026 Employment Situation news release in February 2026.

Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, told Kitco News that the revisions could hurt the broad market rally.

"The jobs picture keeps deteriorating, and while that should make it easier for the Fed to cut rates this fall, it could also throw some cold water on the recent rally," he said. "Worse still, if the CPI shows a worsening trend of higher inflation on Thursday, then the market will begin worrying about stagflation."

"The bull market has been extremely resilient this year, but we could be approaching an inflection point where it is tested again."

Source: Kitco

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Daniel Foster

Oil rose for a third session after President Donald Trump told European Union officials he’s willing to slap new tariffs on India and China in an effort to get Russia to negotiate with Ukraine.

However, it came with a caveat — Trump will only impose levies if EU nations do so as well. West Texas Intermediate climbed to trade near $63 a barrel during early Asian trading, while Brent closed above $66 on Tuesday. Futures gained in the previous session after Israel conducted a strike in Doha targeting senior Hamas leadership, raising concerns about escalating tensions.

The strike marks Israel’s first attack in Qatar’s capital since the onset of the nearly two-year conflict that has roiled global oil markets. It also threatens to derail US-led peace talks between Israel and Hamas, which might have eased lingering geopolitical risk premiums in crude prices. Israel has claimed full responsibility and Trump distanced himself from the attack.

Meanwhile, Trump’s tariff proposal amounted to a challenge given that nations including Hungary have blocked more stringent EU sanctions targeting Russia’s energy sector in the past. The US president has so far hit India with crushing levies for its oil trade with Moscow, but skipped similar measures on China.

Source: Bloomberg Europe

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Winkelmann

Economic

Forex

Political

Key points:

● Sri Mulyani had won respect of markets through fiscal caution

● Source says prudent approach was at odds with president's growth agenda

● President Prabowo has said Indonesia could take on more debt

Indonesia's Finance Minister Sri Mulyani Indrawati was chairing a meeting with top ministry officials when she received a call from President Prabowo Subianto's office informing her she would be replaced within an hour, two sources said, underscoring the abruptness of the longtime finance czar's sacking.Sri Mulyani, known for her cautious steering of Southeast Asia's largest economy that won the confidence of markets, was widely regarded as one of the few checks on Prabowo's big growth and spending promises that had unnerved many investors.

Prabowo kept her on when he took power last year in a signal of policy continuity from the largely stable reign of his predecessor, but the relationship came to a sudden end less than a year in.Two sources with direct knowledge of events leading up to Sri Mulyani's ousting on Monday told Reuters on condition of anonymity that she was in a meeting after 2:30 p.m. (0730 GMT) when she got a call from one of Prabowo's closest aides.The official announcement came less than an hour later that she had been replaced by economist Purbaya Yudhi Sadewa.

"She was supposed to have a (meeting) agenda with the president in the morning that day, but it was cancelled," said one of the sources, who is close to Sri Mulyani.Sri Mulyani and the President's office did not immediately respond to Reuters' requests for comment.It had previously been unclear if she resigned or was removed. The sources, both close to the ousted minister, one of whom was in the ministry, confirmed Sri Mulyani was asked to leave.One more government source confirmed she did not resign, but did not comment on the chain of events.

MARKET STABILITY

Sri Mulyani and Prabowo were peers in the cabinet of President Joko Widodo from 2019 to 2024, with the latter serving as defence minister.One of the sources said Prabowo only hired Sri Mulyani because of a push from three former presidents and to give stability to the markets.They said Sri Mulyani's prudent approach was at odds with Prabowo's big spending plans, with projects such as the ambitious - and expensive - free meals programme for 82.9 million Indonesians.

The programme will get a massive boost with a $20.7 billion budget in 2026 - almost double that of this year - while other areas such as funding for regional governments were cut to control the fiscal deficit.While Sri Mulyani - who served under three presidents across two stints as finance minister - tried to accommodate Prabowo's policies, the two barely met, the source said, as communication with the president had become increasingly difficult.The sources told Reuters Sri Mulyani was shaken after one of her homes was looted during two weeks of protests and unrest against government spending priorities and tax plans.Prabowo asked during a cabinet meeting if she was okay after the looting and she responded in the affirmative and continued in the role, two sources said, adding everything ran normally until Monday.

FISCAL DIFFERENCES?

While it was unclear why Sri Mulyani was replaced, economists believe the two did not see eye-to-eye on fiscal matters.Earlier this year, Prabowo established a new sovereign wealth fund and appointed high-profile advisers known for risk-taking in business and investment, with the aim of strategically leveraging more of its assets to spur growth.A source in the fund, who declined to be identified, said at least one adviser told Prabowo Sri Mulyani's fiscal conservatism was not compatible with higher growth targets.

Indonesian law says the fiscal deficit cannot exceed 3% of GDP - a safeguard against the kind of economic instability that rocked the country in the late 1990s under authoritarian leader Suharto.While that law has long been respected - particularly under Sri Mulyani - many detractors see fiscal conservatism as a growth impediment, including Prabowo, who said prior to taking office that Indonesia could take on more debt.