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The award, which will go to BAE Systems, is part of a new government program aimed at creating a more secure supply of semiconductors.The Biden administration will announce on Monday that BAE Systems, a defense contractor, will receive the first federal grant from a new program aimed at shoring up American manufacturing of critical semiconductors.The company is expected to receive a $35 million grant to quadruple its domestic production of a type of chip used in F-15 and F-35 fighter jets, administration officials said. The grant is intended to help ensure a more secure supply of a component that is critical for the United States and its allies.The award is the first of several expected in the coming months, as the Commerce Department begins distributing the $39 billion in federal funding that Congress authorized under the 2022 CHIPS and Science Act. The money is intended to incentivize the construction of chip factories in the United States and lure back a key type of manufacturing that has slipped offshore in recent decades.Gina Raimondo, the commerce secretary, said on Sunday that the decision to select a defense contractor for the first award, rather than a commercial semiconductor facility, was meant to emphasize the administration’s focus on national security.“We can’t gamble with our national security by depending solely on one part of the world or even one country for crucial advanced technologies,” she said.Semiconductors originated in the United States, but the country now manufactures only about one-tenth of chips made globally. While American chip companies still design the world’s most cutting-edge products, much of the world’s manufacturing has migrated to Asia in recent decades as companies sought lower costs.Chips power not only computers and cars but also missiles, satellites and fighter jets, which has prompted officials in Washington to consider the lack of domestic manufacturing capacity a serious national security vulnerability.A global shortage of chips during the pandemic shuttered car factories and dented the U.S. economy, highlighting the risks of supply chains that are outside of America’s control. The chip industry’s incredible reliance on Taiwan, a geopolitical flashpoint, is also considered an untenable security threat given that China sees the island as a breakaway part of its territory and has talked of reclaiming it.The BAE chips that the program would help fund are produced in the United States, but administration officials said the money would allow the company to upgrade aging machinery that poses a risk to the facility’s continuing operations. Like other grants under the program, the funding would be doled out to the company over time, after the Commerce Department carries out due diligence on the project and as the company reaches certain milestones.“When we talk about supply chain resilience, this investment is about shoring up that resilience and ensuring that the chips are delivered when our military needs them,” said Jake Sullivan, President Biden’s national security adviser.BAE, partly through operations purchased from Lockheed Martin, specializes in chips called monolithic microwave integrated circuits that generate high-frequency radio signals and are used in electronic warfare and aircraft-to-aircraft communications.The award will be formally announced at the company’s Nashua, N.H., factory on Monday. The facility is part of the Pentagon’s “trusted foundry” program, which fabricates chips for defense-related needs under tight security restrictions.In the coming months, the Biden administration is expected to announce much larger grants for major semiconductor manufacturing facilities run by companies like Intel, Samsung or Taiwan Semiconductor Manufacturing Company, known as TSMC.Speaking to reporters on Sunday, Ms. Raimondo said the grant was “the first of many announcements” and that the pace of those awards would accelerate in the first half of next year.The Biden administration is hoping to create a thriving chip industry in the United States, which would encompass the industry’s most cutting-edge manufacturing and research, as well as factories pumping out older types of chips and various types of suppliers to make the chemicals and other raw materials that chip facilities need.Part of the program’s focus has been establishing a secure source of chips to feed into products needed by the American military. The supply chains that feed into weapons systems, fighter jets and other technology are opaque and complex. Chip industry executives say that some military contractors have surprisingly little understanding of where some of the semiconductors in their products come from. At least some of the chip supply chains that feed into American military goods run through China, where companies manufacture and test semiconductors.Since Mr. Biden signed the CHIPS act into law, companies have announced plans to invest more than $160 billion in new U.S. manufacturing facilities in hopes of winning some portion of the federal money. The law also offers a 25 percent tax credit for funds that chip companies spend on new U.S. factories.The funding will be a test of the Biden administration’s industrial policy and its ability to pick the most viable projects while ensuring that taxpayer money is not wasted. The Commerce Department has spun up a special team of roughly 200 people who are now reviewing company applications for the funds.Tech experts expect the law to help reverse a three-decade-long decline in the U.S. share of global chip manufacturing, but it remains uncertain just how much of the industry the program can reclaim.While the amount of money available under the new law is large in historical proportions, it could go fast. Chip factories are packed with some of the world’s most advanced machinery and are thus incredibly expensive, with the most advanced facilities costing tens of billions of dollars each.Industry executives say the cost of operating a chip factory and paying workers in the United States is higher than many other parts of the world. East Asian countries are still offering lucrative subsidies for new chip facilities, as well as a large supply of skilled engineers and technicians.Chris Miller, a professor of Tufts University who is the author of “Chip War,” a history of the industry, said there was “clear evidence” of a major increase in investment across the semiconductor supply chain in the United States as a result of the law.“I think the huge question that remains is how enduring will these investments be over time,” he said. “Are they one-offs or will they be followed by second and third rounds for the companies involved?”Don Clark More

Federal Reserve officials could keep all options on the table at their meeting this week, even as data shape up according to plan.When Jerome H. Powell, the Federal Reserve chair, takes the stage at his postmeeting news conference on Wednesday, investors and many Americans will be keenly focused on one question: When will the Fed start cutting interest rates?Policymakers raised borrowing costs sharply between March 2022 and July, to a 22-year high of 5.25 to 5.5 percent, in a bid to wrestle rapid inflation under control by cooling the economy. They have paused since then, waiting to see how the economy reacted.But with inflation moderating and the job market growing at a more modest pace, Wall Street increasingly expects that the Fed could start cutting interest rates soon — perhaps even within the first three months of 2024.Fed officials have been hesitant to say when that might happen, or to even promise that they are done raising interest rates. That’s because they are still worried that the economy could pick back up or that progress taming inflation could stall. Policymakers do not want to declare victory only to have to walk that back.Mr. Powell is likely to strike a noncommittal tone this week given all the uncertainty, economists said. After their decision on Wednesday, Fed officials will release a fresh quarterly Summary of Economic Projections showing where they think rates will be at the end of 2024, which will indicate how many rate cuts they expect to make, if any. But the projections will offer few hints about when, exactly, any moves might come.And both the Fed’s forecasts and Wall Street’s expectations could mask a stark reality: There is a wide range of possible outcomes for interest rates next year, depending on what happens in the economy over the next couple of months.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

Alexander MacKay coleads the Pricing Lab at Harvard Business School, a research center devoted to studying how companies set prices. Since the pandemic, he has watched how businesses have become more willing to experiment with what they charge their customers.Big companies that had previously pushed through one standard price increase per year are now raising prices more frequently. Retailers increasingly use digital price displays, which they can change with the touch of a button. Across the economy, executives trying to maximize profits are effectively running tests to see what prices consumers will bear before they stop buying.Huge disruptions to supply chains pushed up corporate costs during the pandemic and forced many companies to think more creatively about their pricing strategies, Mr. MacKay said. That supercharged a trend toward more rigorous pricing, and showed many companies that they could more boldly play with prices without chasing shoppers away. The experimentation continues even as costs ease.“We may have prices changing more quickly than they have before,” he said. That could mean up or down, though companies are generally more eager to raise prices than cut them. Firms are trying to figure out how to protect the profits they have built since the pandemic. For big companies in the S&P 500 index, the average profit margin — the percentage of profit relative to revenue — soared in late 2020 and into 2021, as government stimulus and the Federal Reserve’s emergency interventions stoked consumer demand. At the same time, companies raised their prices so much that they more than covered higher costs for energy, transportation, labor and other inputs, which have recently started to come down.Corporations as varied as Apple and Williams-Sonoma recently reported their highest-ever margins for the third quarter, while Delta Air Lines said its international routes generated record profitability over the summer.Margins eased somewhat last year, but have recently recovered to levels that would have set records before the pandemic. Average margins in nearly every sector in the S&P 500 are running near or above 10-year highs, according to Goldman Sachs.“Companies are maintaining or even expanding margins because they are not passing these cost cuts onto consumers,” said Albert Edwards, a strategist at Société Générale, who called recent moves in margins “obscene.”

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Quarterly net profit margin of S&P 500 companies
Source: FactSetBy The New York TimesNow, companies are trying to figure out how to set prices to protect profits at what could prove to be a turning point. High interest rates and waning savings are making some — though by no means all — shoppers more price sensitive.Many companies may be able to protect profits just by holding prices steady as their own costs come down. But some are still thinking about whether they can push prices up further as demand cools and overall inflation abates.“I don’t think companies have the monopoly power to just willy-nilly raise prices,” said Ed Yardeni, president of the research firm Yardeni Research.There’s a focus on margins over market share.Many corporations are talking on earnings calls about how they are prioritizing profit margins — even when that translates into less growth.Take Sysco, the food wholesaler. Its local market business has turned slower recently, Kevin Hourican, the company’s chief executive, said on an October earnings call.But “Sysco is not reacting by leading with price to win share,” he said, referring to the tactic of cutting prices to gain more customers, which is commonly used during downturns. “Instead, we are focused on profitable growth.”Lennox, a heating and air-conditioning company, is working to perfect its pricing strategy based on years of data, Alok Maskara, the firm’s chief executive, said at an investor event this summer.People in the industry are “margin-dollar focused versus revenue-dollar focused,” he said, implying that fewer, more-profitable sales are preferred to many, less-profitable ones.That’s a shift from post-2009 practice.The focus on higher margins — even if it means selling less — is in some cases a shift away from the conventional wisdom in the years during and after the 2009 recession. Back then, some executives felt compelled to compete on price for cost-sensitive shoppers. For hotels, that meant a focus on filling every room.“If you remember back in the Great Recession, there was this view of let’s just drop rates until we get people to heads in beds,” Leeny Oberg, Marriott’s chief financial officer, said in a September meeting with investors. She added that “it wasn’t necessarily the right strategy all the time.”Now “the industry has clearly learned some lessons,” she said. Over the past few years, the company has aimed for more of a balance between maximizing revenue and profit, she noted.Retailers, which have been caught out by shifting consumer tastes in recent years, are talking more lately about “inventory discipline,” or keeping less product in stock, so that they can avoid selling things at clearance prices. The logic is that it’s better to sacrifice a few sales by running out of products than being forced to slash prices in a way that hits the bottom line.The clothing chain American Eagle Outfitters has been expanding its margins by “maintaining tight inventory and promotional discipline,” Jay Schottenstein, the company’s chief executive, said on a November earnings call.Companies learned they can charge more than they thought.While consumers are pulling back from some purchases as prices rise, that is not universally true — hence the value of experimentation. Robert J. Gamgort, the chief executive of Keurig Dr Pepper, said recently that consumers have shown little reaction to higher costs for carbonated drinks.That suggests “it was too good of a value at the start at this,” he said at an investor conference in September, referring to the recent inflationary period. “It was underpriced.”The company, which raised prices at its U.S. beverage unit by 7 percent last quarter, highlighted “strong gross margin expansion” at the top of its latest earnings report.Some executives also find that they can charge more by branding something as a luxury product or experience.“Despite the current economic environment, we continue to see consumers trade up to premium amenities,” Melissa Thomas, chief financial officer at the movie theater chain Cinemark, said on a November earnings call.But price sensitivity may return.Kellogg, the cereal company, had been passing through substantial price increases without losing customers — a situation economists call low price elasticity. It’s like if you snap a rubber band (raise prices) but it doesn’t react (shoppers keep buying).But recently, consumers are beginning to pull back in response to sticker shock.“Price elasticity has hit the market pretty meaningfully,” Gary Pilnick, Kellogg’s chief executive, said on a call with analysts last month. “You might recall that there’s been about 35 percent of price increases over the last couple of years for us, and the elasticities were fairly benign for quite some time.”Price sensitivity is also showing up at brands that cater to lower-income consumers, like Walmart and McDonald’s, which have seen business expand as wealthier people look for deals.“We continue to gain share with both the middle- and higher-income consumers,” Ian Borden, chief financial officer of McDonald’s, said on an October earnings call, although he noted that the company was seeing its lower-income customers struggle.The ability to raise prices — or keep them high — may not last.Even as companies are getting creative to protect their margins, the economy has also held up better than many expected. Overall growth has remained rapid, consumer spending has expanded, and a long-warned-about recession has remained at bay.The question is whether companies will be able to protect profits in an environment where that momentum slows.“Customers are rebelling,” said Paul Donovan, chief economist at UBS Global Wealth Management. “We have reached that point of resistance.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Unhedged newsletter. Sign up here to get the newsletter sent straight to your inbox every weekdayGood morning. Ethan here; Rob is out. This week is a big one: inflation numbers on Tuesday will be shortly followed by a Federal Reserve meeting the next day. Fed officials appear genuinely divided on how to read the economy, with a few open to rate rises while Fed governor Chris Waller talks about cuts. Jay Powell’s job is rarely ever so hard, or so interesting. Email me: [email protected]. Calling for recession is contrarian nowAt the start of 2023, it was banal to forecast a near-term recession. Today, it’s a risky call. Most economists now see a soft landing as the likeliest way this cycle ends, for good reason. Inflation keeps surprising to the downside. Consumption has powered through high rates. Behind it all is a rock-solid labour market, which added another 200,000 net jobs in November, 50,000 above consensus estimates. As Claudia Sahm argued in our latest Friday interview, supply improvements foiled recession calls.Nonetheless, a few stragglers on Wall Street remain in the recession camp. And though their arguments proved wrong earlier this year, they are worth considering, if only to understand the risks to the soft landing. With that in mind, where does the case for recession stand?For Don Rissmiller, economist at Strategas, his 50 per cent recession probability estimate (versus 40 per cent for a soft landing) comes from an unease with the soft landing story. He nicely sums up why:There remain 5 key elements of the current US soft-landing story that we can’t yet fully subscribe to: 1) The economy can take higher interest rates & grow indefinitely; 2) The lagged effects of prior policy & bank tightening have been fully digested; 3) Continued US unemployment < 4% will be accompanied with acceptable wage inflation; 4) The local labour market is moving to a state of balance by cutting only job openings vs. jobs; 5) Markets (bonds, equities, housing, etc) can easily handle higher interest rates lasting from here.The affirmative case for a (mild) recession was recently made by Matthew Luzzetti, Deutsche Bank’s chief US economist, a longstanding recessionista. He makes three broad points. First, tighter financing is weighing on consumer spending through higher delinquencies and business investment through reduced capex. Luzzetti’s measure of manufacturers’ capex intentions, drawn from regional Fed surveys, is verging on contraction territory. Some broader measures, such as real private-sector equipment investment in the GDP data, are already shrinking year over year, in line with tight financial conditions:Second, fiscal policy is acting against growth. In 2023, fiscal spending either added to or mildly subtracted from growth, but in 2024 it is likely to shave some 0.6 percentage points off headline real GDP growth, according to a Brookings Institution measure. That is in keeping with projections that the US fiscal deficit will shrink next year, in part due to higher expected revenue from capital gains taxes. Third, underlying trend inflation is not necessarily stabilising at 2 per cent, limiting how many pre-emptive rate cuts the Fed can do. Luzzetti notes that several Fed measures of underlying inflation are closer to 3 per cent, and have stopped rapidly declining:Nomura’s US economists, Aichi Amemiya and Jeremy Schwartz, share Luzzetti’s view of the risks to business investment from tight financial and credit conditions. They add another point: labour market strength may be overstated. They note several signs of declining labour demand, including falling job openings, more surveyed workers saying jobs are “hard to get” and the rising duration of unemployment-benefit use.What about the relentless pace of job growth? After Friday’s payroll report, the US economy appears to have gained 186,000 jobs for each of the past six months, including an average of 175,000 in October and November. That is well above the 75,000 or so needed to keep up with baseline population growth. But Amemiya and Schwartz argue that after excluding the effects of recent autoworker and Hollywood strikes, which lift payroll gains as striking workers re-enter employment, the past two months of payroll gains drop to 120,000. Six-month average monthly job growth is probably closer to 130,000, calculates Omair Sharif of Inflation Insights, still strong but suggesting less of a job market buffer.Lastly, JPMorgan’s Marko Kolanovic, who is not in the recession camp but believes recession risk is underestimated, reminds us that the yield curve is still inverted. Recessions have nearly always followed inversions historically, but with a lag time up to two years. That window extends through the back half of 2024, meaning that higher recession risk would be consistent with history. Kolanovic wrote last week:. . . it is becoming consensus thinking that a recession will be avoided. We see the arguments such as no landing, goldilocks, election year seasonality, labour market resiliency, uprating of valuations, Fed put, etc, as various versions of “this time is different.” Going back to basics and the relatively small number of recessions we can study — signalling from yield curve inversion indicates that recession risk is highest between 14 and 24 months following the onset of inversion. That period will cover most of 2024 .These arguments, especially Kolanovic’s point about the yield curve, need to be tempered with a recognition that this supply-dominated cycle looks different. Supply disruptions and the goods-to-services spending shift were largely responsible for inflation’s rise, and improvements in labour supply for its fall, making the historical record an imperfect guide. Still, Wall Street’s last few recession holdouts are highlighting a real weakness in the soft landing story: that it requires everything to go right simultaneously. In particular, softening in business investment and low-end consumption need to stay contained while the labour market returns to normal. But with the ratio of job vacancies to unemployed workers still 12 per cent higher than 2019 levels, it will take at least a few more months to normalise — enough time for something to go wrong. The consensus bet on soft landing is a good one, but by no means bulletproof.One good readScary-sounding numbers on massive organised shoplifting in the US are just wrong?FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, hosted by Ethan Wu and Katie Martin, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youSwamp Notes — Expert insight on the intersection of money and power in US politics. 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The Bank of England faces a particularly stubborn inflation problem that may stop it from cutting interest rates as sharply as peers next year, investors have warned, as the central bank prepares for its final policy meeting of 2023. The Monetary Policy Committee is widely expected to say on Thursday that it is keeping its critical rate at a 15-year high of 5.25 per cent as it reiterates pledges to maintain a “persistently” tough stance on the cost of borrowing. The MPC voted at its past two meetings in September and November to hold interest rates at that level, after raising them from historic lows since the end of 2021. This week’s meeting comes against a backdrop of global speculation that the rate-lifting cycle by big central banks — which started after the end of Covid-19 lockdowns — is not only over, but could be reversed in 2024 as headline inflation indicators fall in advanced economies. But economists have that warned the BoE faces a tougher job than peers such as the European Central Bank in returning consumer price inflation — now at 4.6 per cent — to the 2 per cent target. “The evidence in the UK isn’t there for rate cuts in the near term,” said Ruth Gregory, deputy chief UK economist at the research company Capital Economics. “The MPC will be wary of causing the pound to fall and market interest rates expectations to shift decisively in favour of an even earlier cut.” Investors do not see the BoE cutting its benchmark rate until June 2024 — later than the ECB and the US Federal Reserve, which are tipped to reduce their own main rate between March and May. As of the end of Friday, markets were pricing in about 130 basis points of cuts by the ECB and 100 by the Fed by the end of next year, but only 79 by the BoE.Since its most recent meeting, the MPC has received some welcome data on price rises, with headline consumer price inflation falling sharply from 6.7 per cent in September. Wage figures have also eased somewhat, but leading policymakers have been insisting they are not jumping to conclusions. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Andrew Bailey, BoE governor, warned markets in November that they were underestimating how persistent inflation would prove. Meanwhile, Huw Pill, chief economist, told the Financial Times it was risky to put too much weight on one soft inflation reading, and that crucial indicators such as services inflation and pay growth remained at “very elevated levels”. A number of indicators suggest the UK is finding it harder than the eurozone to bear down on price growth. Euro area headline inflation dropped to 2.4 per cent in November, close to the ECB’s target of 2 per cent, with many member countries reporting below-target price growth or deflation. In the UK, inflation remains more than double the target, and analysts expect it to ease only gradually. Economists polled in December by Consensus Economics, a company that collects leading forecasters, expect UK inflation to still be 3.6 per cent by March, higher than the 2.9 per cent for the US and 2.4 per cent for the eurozone. This is even more optimistic than the BoE’s own forecast, which has price growth still above 3 per cent by the end of 2024.Other measures of UK price growth are running far higher, official figures show. Core inflation — which strips out more volatile food and energy costs — is higher in the UK at 5.7 per cent than in any other G7 country, as well as the eurozone, according to the Office for National Statistics.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Services inflation, which is considered a better measure of domestic price pressure, was 6.6 per cent in the UK in October. That is higher than the 4.6 per cent in the eurozone in the same month — it fell to 4 per cent in November — and above the 5.1 per cent in the US. Wage growth, which the BoE is watching closely as an indicator of underlying pricing pressures, is also running hotter in the UK than in some peer countries. An international tracker from jobs website Indeed shows posted pay growth dipped to 7 per cent year on year in October — down from 7.4 per cent in June but still much higher than in the US and the euro area. Pay growth is close to 8 per cent in the UK, according to official figures, nearly double similar measures for the US and the eurozone.Up-to-date official jobs and wage data on Tuesday will offer the MPC more clarity on the state of the labour market before its nine members vote.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.While the BoE has cut its expectations for growth, predicting output will stagnate next year, Pill stressed that the downgrades were not necessarily a boost in the battle to tame inflation. This is because officials have become less optimistic about the supply side of the economy, meaning more sluggish activity may not be associated with easing inflationary pressures. However, with the UK entering a likely election year, officials fully expect to come under increasing pressure to lower interest rates if the economy continues to weaken.Economists who argue that the threat of price rises is subsiding can point to favourable movements in inflation expectations of UK households. The BoE’s survey of public attitudes, published on Friday, showed Britons on average thought the rate of price growth over the next 12 months would be 3.3 per cent in November. That compares with 3.6 per cent in August, when the question was last posed, and was the lowest in two years. One area of investor focus on Thursday will be the voting pattern of the MPC, which has been divided at recent meetings. Three members of the committee — Megan Greene, Jonathan Haskel and Catherine Mann — voted to increase the cost of borrowing last month, with the remainder opting to leave it unchanged. Any defections from that hawkish contingent would be taken in markets as a signal that rate reductions are more likely next year. Sanjay Raja, economist at Deutsche Bank, predicted the BoE would start cutting rates only from the second quarter of next year, but warned that “wage stickiness and upcoming changes to CPI could end up delaying the start of any easing cycle”.  More

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SINGAPORE (Reuters) – The dollar started Monday on the front foot, with a reading on U.S. inflation and the Federal Reserve’s last policy meeting for the year likely to set the tone for the week, while rising deflationary pressure in China leant on the yuan.The greenback pushed back above 145 yen and last bought 145.12 yen, reversing some of its steep fall against the Japanese currency late last week, as bets grew that the Bank of Japan’s ultra-low interest rates policy may be nearing an end.Sterling dipped 0.02% to $1.2545 and was huddled near Friday’s two-week low of $1.2504.Data on Friday showed U.S. job growth accelerated in November while the unemployment rate fell to 3.7%, underscoring the resilience of the labour market in the world’s largest economy and challenging expectations of imminent rate cuts from the Fed beginning early next year.”They were a good set of numbers,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia (OTC:CMWAY) (CBA).”Wages were still running probably too hot for the Fed to be comfortable and the unemployment rate fell – that was a really big surprise.”The figures caused traders to push back expectations of how soon the Fed could begin cutting rates, with many now leaning toward May instead of March.The euro rose 0.06% to $1.0767 but stood not too far from Friday’s more than three-week low of $1.07235, while the dollar index steadied at 103.95.The index gained more than 0.7% last week, reversing three weeks of loss.Focus now turns to the Federal Open Market Committee (FOMC) policy meeting later this week and U.S. inflation data due ahead of that, where expectations are for consumer prices to continue easing on an annual basis.”The big influence on the U.S. dollar this week is going to be the FOMC meeting, in particular Chair (Jerome) Powell’s comments at his press conference,” said CBA’s Capurso.”If he’s (hawkish), I think markets will probably ignore him and the U.S. dollar remains steady. But if he’s dovish, then I think the U.S. dollar and bond yields will fall, so it’s an asymmetric reaction.”CHINA STRUGGLESIn Asia, data over the weekend showed China’s consumer prices fell at the fastest pace in three years in November while factory-gate deflation deepened, indicating increasing deflationary pressure as weak domestic demand casts doubt over the country’s economic recovery.The offshore yuan languished near a three-week low and last stood at 7.1842 per dollar, though movement was largely subdued in early Asia trade.”It is important to note that the main drag to China’s headline inflation remains food prices. Nonetheless, the lack of a strong revival in the economy suggests that weak inflation will persist, and more policy support is indeed required,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.The latest numbers add to recent mixed trade data and manufacturing surveys that have kept alive calls for further policy support to shore up growth.The Australian dollar, often used as a liquid proxy for the yuan, was little changed at $0.6577, while the New Zealand dollar was last 0.11% higher at $0.6128. More