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China’s economic growth sputters, the consequences of a falling dollar, and why the Federal Reserve may cut rates in March. — Tiffany TsoiCh [View in browser]( [Bloomberg]( China’s economic growth sputters, the consequences of a falling dollar, and  why the Federal Reserve may cut rates in March. — [Tiffany Tsoi]( China Growth China’s economic recovery [lost momentum in the second quarter](, adding to risks for the world economy as Beijing hints that any stimulus measures will be targeted rather than broad. Gross domestic product grew at a slower-than-expected pace of 6.3% in the second quarter compared with a year earlier, when dozens of Chinese cities were in lockdown, but just less than 1% from the first quarter. Investment by China’s vast property sector also worsened in June from the previous month, a sign of ongoing pain in the housing market. “Property is the key to resolving the various current problems,” said Jacqueline Rong, chief China economist at BNP Paribas SA. “The central bank needs to put a floor to the credit crisis among developers to help them survive.” Bearish Dollar The US currency is teetering at the lowest level in more than a year after signs of cooling inflation bolstered bets that the Federal Reserve will soon stop hiking interest rates. This has a bevy of strategists and investors saying [a turning point is finally at hand for the world’s primary reserve currency](. If they’re right, there will be far-reaching consequences for global economies and financial markets. A long-term dollar slide would reduce import prices for developing nations, helping ease their inflation pressures. It would also bolster currencies like the yen, which has been tumbling for months, and upend popular trading strategies tied to a weaker yen. More broadly, a softer US currency would tend to boost American firms’ exports at the expense of their counterparts in Europe, Asia and elsewhere. Rate Cuts Former Federal Reserve Vice Chairman Richard Clarida said [market wagers on US interest-rate cuts in March are understandable given a scenario where there’s a “softish landing” and the central bank is confident it has reined in inflation.]( “A cut in March, or at least a strong indication at the March meeting that cuts are imminent, you know, makes sense,” said Clarida. At the same time, Clarida remarked that the economic dynamics may change, with a more rapid slowdown in inflation bringing forward the prospect of rate cuts, while stubborn price pressures may delay them until much later in the year or even further away. Clarida’s comments come as investors debate when the Fed is likely to ease monetary policy, and whether or not the world’s biggest economy can emerge unscathed from the most aggressive rate-hike cycle since the 1980s. Flat markets Contracts on the S&P 500 and Nasdaq 100 are both trading nearly unchanged as of 6:10 a.m. in New York. Treasury yields have fallen across maturities, and the dollar weakened slightly. Gold is trading flat and oil prices have climbed, whereas iron ore has drifted lower. Coming up… Janet Yellen is being interviewed by Bloomberg’s Annmarie Hordern at 8:15 a.m, which will be aired on Bloomberg TV. The New York Empire State Manufacturing Index is coming out at 8:30 a.m. At 11:30 a.m., the US is selling $65 billion 13-week and $58 billion 26-week bills. What we’ve been reading Here’s what caught our eye over the weekend: - [US fund giant Vanguard tries to sell itself to Europe]( - [Carlos Alcaraz beats Novak Djokovic to win Wimbledon]( - [Higher UK rates inflict pain on home sellers]( - [Singapore house speaker resigns in new blow to the ruling party]( - [US-China climate talks reopen with vows to take `big steps’]( - [How to make the most of flying economy]( - [Even North America’s Elks have regional dialects]( And finally, here’s what Tracy’s interested in this morning… “We will need to take more pricing. Just maybe not as much," PepsiCo CEO Ramon Laguarta quipped last week as his company unveiled higher-than-expected third-quarter earnings. For Samuel Rines, Corbu strategist and purveyor of the 'Price Over Volume' (PoV) idea [which shot to prominence]( earlier this year, the Pepsi CEO's statement is evidence of the next stage in his ongoing earnings thesis. Where companies like Pepsi took advantage of elasticities and one-off excuses to raise their prices and increase their profit margins in the aftermath of the Covid-19 pandemic, they now seem to be focused on trying to hold onto those increases as much as possible. Enter, 'Price AND Margin,' or PAM, as Rines puts it. It's the next act as companies attempt to maintain the pricing power they've forged during an exceptional period of economic history. "PoV is slowly fading but fading to PAM (Price AND Margin)," he says. "If companies can successfully hold the line on price with declining input costs, the PoV strategies will have been wildly successful." Pepsi isn't the only example of this behavior, of course. Rines also points to the most recent [earnings slide]( from food giant Conagra, which shows that pricing power effectively peaked in the fiscal third quarter of 2023 (or the three months ended Feb. 26, 2023) and is expected to come down slowly in subsequent quarters. In an earnings call with investors, Conagra CEO Sean Connolly talked about consumers pushing back on prices as a potential headwind to future income: "Food companies are starting to wrap pricing in the year-ago period, and dollar sales are coming down as expected. But the rate of improvement in volume recovery is lagging. That suggests new consumer behavior shifts beyond the initial elasticity effects that occurred when pricing actions were initially taken." Still, as the slide suggests, it doesn't seem like Conagra is expecting a big pushback just yet. Source: Conagra There's a lot of heated debate nowadays about how much of a role corporate pricing actually plays in broad-based inflation. The best summation of this debate I've seen comes from [a tweet by Jens Wiechers.]( He jokes that much of the disagreement seems to stem from a big difference in economists' respective beliefs as to how rational economic participants should behave. It is possible to set economic theory aside, and simply listen to what companies are telling you about their prices. There's a face value to just accepting what a business says about its own motivations for raising prices, and its own ability to do so. As the earnings season unfolds, it's worth being on the lookout for more examples of either persistent or fading corporate pricing power. Follow Bloomberg's Tracy Alloway on Twitter @[tracyalloway]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. 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