China’s producer price index fell further into contraction, signaling a worsening economic slowdown that threatens to add deflationary pressures to the global economy, said Bloomberg.
Factory prices fell 0.8% in August from a year earlier, compared with a decline of 0.9% in the median estimate of economists in a Bloomberg survey. The consumer price index rose 2.8% year-on-year, faster than the median estimate of 2.7%.
The contraction in factory prices hurts manufacturers’ pricing power and threatens disinflation to the rest of the global economy via exports. The central bank announced fresh easing measures last week including cuts to the amount of cash banks’ hold as reserves, but economists said more stimulus is needed to boost demand
“Price pressures in China are weak overall, even with pockets of strength in food inflation on soaring pork prices. To us, the main risk is deflation, or at least dis-inflation — not rising inflation. This spells more pressure on the People’s Bank of China to ease monetary policy, ” said David Qu.