2023-07-10 05:35:00
In China, we are fighting once morest deflation. The consumer price index (CPI), the main gauge of inflation, fell to 0% year on year in June, once morest 0.2% a month earlier, according to the National Bureau of Statistics (BNS). ). This is less than expected by analysts polled by Bloomberg (+0.2%).
China on the brink of… deflation
A sluggish demand
These figures fuel fears of deflation – a decline in consumer prices – in the world’s second largest economy. Indeed, far from the increases observed in developed countries, food prices in China fell slightly in one year (-0.5%) as did those of consumer goods (-0.3%), while those of services remained almost stable (+0.1%). Producer prices (ex-factory prices) plunged further, a sign of sluggish domestic demand and falling costs of raw materials such as iron ore and crude oil.
Towards lower interest rates
The PPI index thus fell by 5.4% in June according to the SNB, for the ninth consecutive month. This is more than in May (-4.6%) and more than the forecasts of analysts polled by Bloomberg (-5%). In May, the Asian giant’s exports contracted by 7.5% over one year and manufacturing activity fell for the second consecutive month. Activity in services in China grew in June, but at one of the weakest rates of the year.
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Additionally, the Purchasing Managers’ Index (PMI), released by media group Caixin and S&P Global, came in at 53.9 points last month, a slowdown from 57.1 in May. . A number below 50 reflects a contraction in activity. Beyond that, it indicates expansion. The June figure is the second lowest since January, the month that began a gradual return to normal in China following three years of Covid health restrictions.
“The recovery in China lacks a fulcrum to compensate for the lack of engine in the domestic market, weak demand and a darkening of the economic outlook” internationally, notes economist Wang Zhe for Caixin.
To revive the economy, analysts recommend a drop in interest rates. What the Chinese central bank decided to do by lowering the rate at which it provides short-term liquidity to commercial banks from 2% to 1.9% in mid-June. China is aiming for growth regarding 5% this year, one of the lowest in decades. The growth figure for the first half will be known on July 17.
(With AFP)
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