For the first time since the beginning of 2021, the Consumer Price Index (CPI) in China fell -0.3% in July and catapulted the world’s second largest economy into deflationary terrain, according to official data from the National Office of Statistics (ONE).
China runs in the opposite direction to the world: while in other countries interest rates are increased to make credit more expensive -a mechanism to contain inflation-, in the Asian giant they are cut while waiting for households to multiply their consumption.
What happen? For an economy considered the ‘world’s factory’, the rapid slowdown in internal and external demand has forced Chinese manufacturers to receive less income from their production, which is not at the same magnitude as a year ago, between multiple other factors.
Thus, food prices in China weighed down 1.7% in July, leveraged by a drop of around 14% in meat values, especially pork (-26%), an essential product in the basic basket of that country.
Services, on the other hand, rose 1.2% in the seventh month of the year, with which core inflation went from 0.4% to 0.8%, the highest level since last January.
Meanwhile, the Industrial Production Price Index (PPI) for July -associated with construction prices- maintained the deflation already registered since September 2022. The annual decline of 4.4% warned this Wednesday comes after the fall from 5.4% in June.
This scenario, warned by various specialists since the figures for the second half of 2023 were published, generates uncertainty among the global markets for raw materials, such as oil and copper, as well as international manufacturing trade.
Source: Larepublica
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