A calm week for rubber and latex prices, although with a slightly bearish sentiment originating from weak demand in China. The Asian giant has implemented stimulus measures to counteract economic growth that is below expectations. The question remains: will these measures boost rubber demand if electric vehicle sales increase? On the other side of the globe, in the United States, the economy shows solidity with sustained growth, indicating a possible decline in inflation without a recession.
China's GDP grows below expectations and the government launches stimulus measures
China's GDP, the world's largest consumer of natural rubber, grew by 4.7% year-on-year in the second quarter of the year, below market expectations and even the government's target of 5%. To counteract this effect, the government has launched a series of stimulus measures.
At the macro level, there is a notable 1% reduction in the interest rate, with the intention of encouraging consumption and investment. At the micro level, the subsidy for those who switch their combustion vehicle for an electric one was doubled (now amounting to just over USD 2,700).
If the measure is effective in increasing vehicle sales and production, it could boost demand for tires and thus natural rubber. This has managed to offset the impact of bad economic news on prices.
Car sales in China stagnate
Car sales in China fell 6.9% year-on-year in June. It is true that there was some improvement compared to the total number of vehicles sold in the previous month, but overall, the trend shows that sales are stagnant at a level significantly lower than at the end of last year.
This sets up a scenario of low expected demand for natural rubber, given that the sector is the main buyer. If the trend continues, it will be an important factor pressing prices down.
In other news from China, the third plenary session of the Communist Party concluded. Generally, there were no major announcements, although the official statement suggests a focus on boosting the technology sector and greater state intervention. Without clarity, we do not expect impacts on commodity prices.
The U.S. economy continues its course