CAS Institute Flags Slow Demand Recovery and Structural Divergence in Q2 2026

The current economy faces challenges including a slow pace of aggregate demand recovery, visible structural divergence, real estate market adjustment, and external financial volatility.

The deep-seated causes of this round of structural divergence include: the transitional pains of shifting from old to new growth drivers, with rapid expansion in new tracks coexisting with contraction in traditional industries; the current PPI rebound is mainly driven by external supply shocks, with raw material price increases outpacing finished goods prices, continuously squeezing the profits of small and medium-sized enterprises in midstream and downstream sectors; imbalanced income distribution, asset shrinkage and slower income growth for middle- and low-income groups; and valuation divergence between technology and traditional sectors in financial markets, which amplifies real economy divergence through wealth effects and financing channels.

At the end of the second quarter, as the Federal Reserve signaled a tighter policy stance, high-valuation technology sectors saw profit-taking, and volatility in major global stock markets increased.