China’s producer prices fell into deflation for the first time in nearly two years as global commodity prices slid and restrictions to control Covid outbreaks dragged on demand, a further sign of the challenges facing companies already under pressure from the economic downturn.
The subdued consumer and producer prices in China stand in contrast with other nations, where central banks have raised interest rates repeatedly to tame costs. Demand in China has been hit hard by the ongoing property market crisis and repeated Covid outbreaks and lockdowns, which have weighed on confidence.
“We think that China may begin to engage in a fierce battle with looming risks from deflation with weak domestic demand and softening export demand,” said Bruce Pang, chief economist at Jones Lang LaSalle Inc. Part of the weakness in factory prices can be explained by last year’s high base of comparison: PPI hit a 26-year high at this point in 2021 as global commodity prices rallied on booming post-pandemic demand and tight supplies.
Dong Lijuan, chief statistician at the NBS, said the fall in demand after the holiday period in early October dragged on consumer price growth, as did a high base with last year.
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