Market Round-Up

China’s population fell for the first time in six decades in 2022, in an historic shift that is expected to have long-term consequences for domestic and global economies. The National Bureau of Statistics announced a fall of 850,000 in 2022 to 1.41175bn, with analysts estimating India now has the largest population in the world. The birth rate in 2022 was the lowest recording for more than seven decades at 6.77 births for every 1,000 people, down from 10.41 in 2019.

The decline could be attributed to the one-child policy imposed by Beijing in 1980, with strictly enforced punishments which aimed to restrict the uncontrollable growth rates. For years, the policy was argued to be a key factor in facilitating economic growth within the country. China officially ended its one-child policy in 2016, moving to a two-child policy before extending it to three in 2021 following China’s 2020 census which showed the fertility rate was recorded as lower than required for a stable population. 

China’s demographic turning point could draw similarities with Japan, whose population began to decline in 2010 and has fallen consecutively since. China is currently expecting an ageing population and a shrinking workforce. Analysts are largely in agreement that the country’s social welfare and medical infrastructure are underprepared for its ageing population, with reforms expected of its inefficient and unequal healthcare system. Economists have argued the rise of automation will offset the effects of higher labour costs and a shrinking labour force, with labour supply currently exceeding demand and improvements in labour quality and education levels also being considered. 

The UK inflation rate fell slightly in December to 10.5%, marking a second consecutive slowdown after hitting the 41-year peak of 11.1% in October. The annual rate of consumer price inflation declined from 10.7% in November, however, economists do not expect these changes to ease the pressure on the Bank of England (BoE) to further raise interest rates. 
The drop was mainly due to a fuel price decline of 8.3% in December leading to the lowest petrol prices since before the Russian invasion of Ukraine. These declines were partially offset by a continued rise in food and alcoholic beverage prices, with food price inflation rising from 16.5% to 16.9%. Core inflation – which strips out volatile food, energy, alcohol, and tobacco – remained unchanged at 6.3%. The figure surpassed the expectations of economists by 0.1%, with the figure frequently used to measure underlying price pressures within the economy.

December’s slowdown in price growth is unlikely to bring relief to the pressure being placed on households struggling with the cost-of-living crisis, with lower-income families continuing to struggle with higher energy bills and food prices. The report highlights the BoE’s priority of tackling inflation at its meeting next month, with economists predicting that interest rates will need to rise by a further 1% in upcoming months – taking rates to 4.5% - before the bank is able to consider revoking its tightening cycle.

The Office for National Statistics (ONS) also revealed this week that UK wages grew at the fastest rate since the pandemic, with average pay in November 6.4% higher than a year prior, despite failing to keep pace with inflation. Despite this, with inflation running at 10.7% average earnings were still 2.6% lower in real terms than in 2021, which marked one of the biggest falls in living standards since records began in 2001.

However, wage growth was much stronger in the private sector compared with the public – 7.2% compared with 3.7% - with the increased gap between wage growth fuelling current wage disputes between the government and striking public sector workers. Strike disruption in November was the highest recorded for more than a decade, with figures expected to raise further in December with nurses, ambulance staff and other sectors also beginning their industrial action. The ONS recorded a loss of 467,000 working days in November. 

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