Merchants Macro: Economic improvement in September may be better than in July and August.

The Choomoo Macro Research Report stated that, based on recent high-frequency domestic data, production in some upstream industries has stabilized since September, with domestic demand slightly better than that in July and August. The decline in inventory of items such as rebar and hot-rolled coils indicates a convergence of supply and demand, confirming that industrial product prices have stabilized. The effect of the policy of trading in old for new consumer goods continues, and some provinces and cities have already targeted policies to boost consumption ahead of the National Day holiday. Overseas, the Federal Reserve unexpectedly cut interest rates by 50 basis points to prevent significant fluctuations in US stocks and bonds, which were already expected to happen. However, subsequent statements from the Federal Reserve aimed to prevent a collapse of the stock market due to a significant interest rate cut and large-scale capital outflows from the US capital market. Recent high-frequency domestic data shows that production in some upstream industries has stabilized since September, with slightly better performance in domestic demand compared to July and August. The decline in inventory of items such as rebar and hot-rolled coils indicates a convergence of supply and demand, confirming that industrial product prices have also stabilized. Consumer travel during the Mid-Autumn Festival holiday remains high, and the effect of the policy of trading in old for new consumer goods is ongoing. Some provinces and cities have already started to introduce targeted policies to boost consumption ahead of the National Day holiday. However, real estate transactions remain sluggish, and the expected boost from "Golden September" has not materialized. More incremental policies are expected to be implemented in the fourth quarter. Although maintaining the status quo may be more in line with the "consolidating the foundation and fostering originality" principle, sustained marginal improvement could still boost market confidence. On the overseas front, the Federal Reserve unexpectedly cut interest rates by 50 basis points to prevent significant fluctuations in US stocks and bonds, but subsequent statements indicate that the Federal Reserve also aims to prevent a collapse of the stock market due to a significant interest rate cut and large-scale capital outflows from the US capital market. Additionally, until US economic data deteriorate significantly, even a substantial interest rate cut by the Federal Reserve may not significantly boost non-US assets. On the domestic front, high-frequency indicators at the production end show differentiation. Overall, high-frequency data for upstream production remains at a low level compared to recent years, but there has been an improvement in the production of important industrial products such as blast furnace, asphalt, and pig iron. Midstream production is better than upstream, but the operating rates of some industrial products like semi-steel tires, PTA, and polyester slices have declined marginally. The effect of the policy of trading in old for new consumer goods is still ongoing, with sales of new energy passenger vehicles continuing to rise, and home appliance consumption maintaining a relatively high growth rate; as the National Day holiday approaches, some provinces and cities have begun to introduce targeted policies to boost consumption on this basis. The real estate market's "Golden September" boom has not materialized, with a significant cooling of the sentiment for trading price for volume in second-hand housing, increasing downward pressure on real estate prosperity as demand remains weak. Overall assessment based on high-frequency data suggests that domestic demand was slightly better in September than in July and August, with a possible contraction in the supply-demand gap. The progress of new local special bond issuances has essentially caught up with the target for 2023; however, fiscal and government deposit data for August indicate that expenditure progress has not matched, and the supportive effect on the economy has not yet materialized. Market expectations for policies continue to rise, and more proactive policies at the macro level are expected to be implemented in the fourth quarter. On the overseas front, this week the Federal Reserve cut interest rates by 50 basis points, maintained its balance sheet reduction pace, lowered core inflation forecasts for 2024-2025, raised unemployment rate expectations for 2024-2026, and the dot plot suggests a 100 basis point cut in interest rates in the next two years. It released three signals - 1) the Federal Reserve believes that the impact of the pandemic on employment and inflation has ended; 2) the era of forward guidance is temporarily over, with the Federal Reserve unwilling to reveal all policy details, the significant 50 basis point cut is to prevent significant fluctuations in US stocks and bonds that were already expected, and Powell's attitude of cautiously watching is also to prevent situations like the reversal of yen carry trades in early August due to concerns about a hard landing of the US economy; 3) the Federal Reserve also wants to prevent a collapse of the stock market due to a significant interest rate cut and large-scale capital outflows from the US capital market. Additionally, until US economic data deteriorate significantly, even a substantial interest rate cut by the Federal Reserve may not significantly boost all non-US assets. However, it can be expected that the US dollar index is unlikely to strengthen in the short term, which may ease the depreciation pressure on non-US currencies. The article comes from the WeChat public account "Choomoo Macro Reflection." GMTEight editor: Liu Xuan.