The rich have cut their spending on everything from homes to jewelry, sparking fears of a trickle-down recession that starts at the top.

From real estate and retail stores to classic cars and art, the weakest segment of the American economy right now is the very top. While the middle class and broader consumer sections continue to spend, economists say the sudden pullback among the wealthy could cascade down to the rest of the economy and create a further drag on growth.

Luxury real estate is having its worst year since the financial crisis, with pricey markets like Manhattan seeing six straight quarters of sales declines. According to Redfin, sales of homes priced at $1.5 million or more fell 5% in the U.S. in the second quarter. Unsold mansions and penthouses are piling up across the country, especially in ritzy resort towns, with a nearly three-year supply of luxury listings in Aspen, Colorado, and the Hamptons in New York.

Retailers to the 1% are faring the worst, with famed Barney’s filing for bankruptcy and Nordstrom posting three consecutive quarterly declines in revenue. Meanwhile, Wal-Mart and Target, which cater to the everyday consumer, are reporting stronger-than-expected traffic and growth.

At this month’s massive Pebble Beach car auctions, known for smashing price records, the most expensive cars faltered on the auction block. Less than half of the cars offered for $1 million or more were able to sell. But cars priced at under $75,000 sold quickly — many for far more than their estimates.

In the first half of 2019, art auction sales were down for the first time in years. Sales at Sotheby’s dropped 10% and Christie’s auction sales were down 22% from a year ago.

There are many reasons for spending declines — tax changes, for instance, are to blame for some of the real estate slump. And parts of the high-end economy have retained their shine — from luxury new car sales to Swiss watches and fashion.

Yet recent data suggest that the U.S. wealthy are beginning to shut their wallets. If their spending falls further, the broader economy could start to feel the pain. The top 10% of earners account for nearly half of all consumer outlays, according to Mark Zandi, chief economist at Moody’s Analytics. But their spending has fallen over the past two years, while spending for the middle class has accelerated.

“If high-income consumers pull back any further on their spending, it will be a significant threat to the economic expansion,” Zandi said.

The savings of the rich has also exploded, more than doubling over the past two years, suggesting that the wealthy are hoarding cash. The middle earners, or those in the 40% to 89.9% of the income distribution, have largely picked up the spending slack from the rich.

“If job growth slows any further, unemployment will begin to rise, (the middle earners) will pack it in, resulting in an economic downturn,” Zandi said. There are two main reasons for the wealth slump: volatile markets and slowing global growth. The top 10% own over 80% of stocks in the U.S., so they are far more sensitive to the recent swings in stocks and bonds.

Also, because many of the wealthy also own companies that do business overseas or have foreign exposure, they have become an early warning system for the economic storms forming around the world.

The middle-class consumer, however, is being buoyed up by strong employment and a relatively stable housing market. A U.S. economy that for over a decade has been defined by the rich reaping the gains and fueling the spending, has now flipped. Now, it’s Main Street that is prospering, while the investor class is signaling a consumer recession. The rich still have plenty of wealth to spend. But spending at the top is driven by confidence and certainty. And right now, they are finding little of either in the global stock markets and trade war.

Raja Sara Petra

Home Minister Muhyiddin Yassin has expressed concern over rising sentiments regarding race, religion and royalty, referred to as ‘3R’. Muhyiddin said police data showed that the number of incidents involving these 3R issues have doubled since the beginning of the year when compared to last year. “Irresponsible people may trigger the sentiments of the people. We cannot compromise with these people as this is not good for the country,” added Muhyiddin.

Muhyiddin is both right and wrong in his observation. The truth is, sentiments regarding race, religion and royalty (or Raja-Raja Melayu) have not increased. They have always been there. The 3R issue has always been sensitive and a divisive factor for Malaysia since long before Merdeka. That, in the first place, was why Umno was formed in 1946 — to defend the position of the Malays, Islam and the Raja-Raja Melayu — which would have been eroded had the British been allowed to proceed with the Malayan Union plan.

So, for 73 years since 1946, the sentiments regarding the 3R issue have remained the same. It has not increased or become worse and neither has it reduced or improved. Selama 73 tahun, sama jer. Tak berubah.

What has increased or become worse is that Pakatan Harapan is using 3R issues to trigger incidences so that Malaysians will focus on issues involving race, religion and royalty instead of issues involving the economy, the performance of Pakatan Harapan, delivery of election promises, etc.

The Zakir Naik issue, the Seni Khat issue, blaming the Sultans ‘interference’ in politics as the reason why people kicked out Barisan Nasional in May 2018, and so on, were all started by Pakatan Harapan. And now people are focusing on that while forgetting that Pakatan Harapan is a failure and is unable not only to perform or to deliver its election promises but is making so many U-turns.

Yes, what Muhyiddin said is true. But that has always been the case since long ago. But what Muhyiddin failed to mention is that Pakatan Harapan is the one guilty of fanning sentiments regarding 3R issues.

(SCMP) – Chinese exporters are praying for a continued depreciation of the yuan, hoping it will cushion the blow of the new round of tariffs to be implemented by the United States.

Many traditional exporters in China’s Pearl River Delta and Yangtze River Delta regions, the country’s manufacturing heartlands, say that the increase in US tariffs to 30 per cent will go beyond the limit of what they can afford.

They also fully expect both the US and Chinese tariffs to increase further, meaning they will lose access to the US market in which they have been operating for decades.

“We were convinced that one of our long-term US clients, who is actually an intermediate trader for supermarket chains in the US, would order from us. But 300 container loads of goods have yet to be shipped, with a value of about US$5 million,” said a Chinese exporter of canned fruit, who wished not to be named.

“The US client called us last weekend and asked us to pay the additional tariff of 5 per cent. We could not refuse since it was our idea to bid to supply the canned fruit for the supermarkets,” she said. “We have no way to deal with it now. We only hope that the yuan will depreciate in the coming weeks and offset the new tariff. Otherwise, we will lose a lot [of money] on this order.”

If the yuan does not further depreciate by more than 5 per cent, she added, the company will have no choice but to cease exports to the US after October 1.

Exporters have been left blindsided after the US said on Friday that it would raise the tariff rate on US$250 billion of Chinese imports from 25 per cent to 30 per cent from October 1, and raise the planned new tariff rate on US$300 billion of goods from 10 per cent to 15 per cent in two tranches on September 1 and December 15.

This was in response to China’s move earlier on Friday to impose retaliatory tariffs of between 5 and 10 per cent on US$75 billion worth of American products, including soybeans, pork, and, for the first time, crude oil. China also reinstated the 25 per cent penalty duty on imports of US-made cars and car parts, bringing the total tariff on the sector to 40 per cent.

“Malaysian manufacturers import oranges from China, process them into canned oranges and export them to the United States. It’s already cheaper than any canned oranges made in China. So you soon may not be able to find made in China canned fruit in American supermarkets.” said the exporter, fearful of losing her US market to Southeast Asian competitors.

Steve Qiu is the founder of a Shenzhen-based tech start-up that designs, produces and exports smart home devices to the US and Europe.

“I changed a number of goods payments from dollars to yuan early this month since I thought it would be impossible to see the yuan fall below 7 to the dollar at that time. But now a growing number of exporters I know are expecting the rate to soon fall below 7.2, 7.3 or even further to cushion the [impact of the] tariffs,” he said.

An increasing number of exporting manufactures, making goods ranging from sofas to hi-tech LEDs, have now accepted that the tariffs are unlikely to be reversed. The latest escalation has also inspired more opposition to US government actions from exporters, and encouraged companies to look to non-US markets as a practical response.

“In the case of medium-and high-end furniture, even with the addition of tariffs, it is still impossible to find substitute markets for our products,” said Xie Jun, a furniture exporter in Haining, a city in Zhejiang province where hundreds of furniture factories make goods for export to the US.

“Of course, our profits are already very small. This round of tariffs is 30 per cent, which is already our limit. If US buyers do not pay for this round of tax increases, we have no choice but to give up on the US market,” he said. “Our manufacturers have become disgusted with the US government, and even US buyers.”

Xie added that a growing number of factories in the region are shifting their exports to India and countries along the belt and road route.

“Tariffs are one trigger, and according to what I know, many [Chinese] state-owned raw material suppliers are starting to offer a cheaper price to Chinese exporters in the toy and furniture sectors [so they are able] to sell to those emerging markets,” Xie said.

Jason Liang, sales manager at a Guangzhou-based exporter of LEDs, said that the soaring tariffs of up to 30 per cent “or even higher, were expected”.

“The United States will not stop the trade war until it sinks the Chinese economy,” Liang said.

“For Chinese exporters, it is useless to be afraid because there is nowhere to hide. We can only rely on the wisdom and countermeasures of the central government,” he said, adding that as long as Beijing can maintain employment levels and prevent the housing market from collapsing, “we are not afraid”.



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