China's Factory Deflation Worsens

Premiere Li Keqiang of China said his nation's economy is facing downward pressure and difficulties, according to China Central Television (Oct. 14).

EWI's October Global Market Perspective addressed the issue with this chart and commentary:


This chart shows the year-over-year change in Chinese Industrial Production. The August figure declined to 4.4%, which is below the extreme during the prior bear market. The last time there was a lower reading was in March 2002, more than 17 years ago.

At the same time, China's factory deflation has worsened. Here's an excerpt from an Oct. 15 Bloomberg article:

China's factory deflation deepened in September due to slowing output growth and falling raw material prices, adding to signs that China's domestic slowdown is an increasing drag on the struggling world economy.

The producer price index fell 1.2% from a year earlier, as forecast by economists in a Bloomberg survey...

China's producer price deflation is acting as a brake on the global price outlook just as central banks step up easing in an attempt to put a floor under slowing world expansion. Weak import data reported Monday had already added to the gloom over the global outlook, which is worsening amid the uncertainty caused by the U.S.-China dispute.

"Growth momentum is definitely weak as indicated by the persistently declining PPI," said [the] chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "The industrial recession is not only caused by the trade war but also a lack of domestic drivers."

Prepare now for what EWI's analysts see ahead. Read the free report, "What You Need to Know Now About Protecting Yourself from Deflation."