Deflation’s grip on the world’s second largest economy is getting tighter.
As Bloomberg noted on Sept. 9:
China’s Deflationary Spiral Is Now Entering Dangerous New Stage
The demand for goods has been weakening. Wages are stagnant. And, in addition to declining property prices, corporate profits are down. Inventories at Chinese manufacturers swell.
China’s central bank has unveiled a host of stimulus measures, but Chinese consumers have failed to respond.
As our October Global Market Perspective says:
No matter how low rates go, consumers refuse to buy “stuff” that is losing value.
China’s Producer Price Index just registered it’s 22nd straight month of decline.
This chart from our October Global Market Perspective shows another broad measure of price change:
The GDP deflator is the difference between China’s nominal and real GDP growth. By this measure, China entered deflation a year and a half ago. Deflation is already deeply ingrained in the Chinese economy.
China is not the only major global economy experiencing woes. Our October Global Market Perspective also discusses “the swiftness of Germany’s economic breakdown.”
Deflation in China: Impossible to Ignore
Producer Price Index registers 22 straight months of decline
A deflationary psychology has taken hold in China. Consumer demand in the world’s second largest economy is weak despite stimulus efforts by China’s central bank. This measure shows that China entered deflation a year and a half ago.
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