Producer prices in China face deflation for the first time since 2020

In China, producer prices dropped to deflationary levels for the first time in two years. This happened because of falling global prices for commodities, as well as restrictions related to COVID-19 epidemics. These are all signs of the problems that firms are already facing during the economic slump.

On Wednesday, the National Bureau of Statistics reported that in October the Producer Price Index fell by 1.3% compared to the previous year. The previous month the growth was 0.9%, and it was the first decrease from December 2020.

At the same time, the growth of consumer inflation stagnated even more as the low demand doesn’t let the prices of goods shoot up. Consumer Price Index increased by 2.1% on a year-on-year basis. However, if we compare this number with the 2.8% surplus in September, we will see a decrease. The core inflation including volatile prices for energy and alimentary products stayed at the level of 0.6%. Last few months it was below 1%.

Such changes influenced trade in China. This week, a drop in exports and imports was recorded, and this is the first time in two years. While consumer and producer prices are still low in China, in other countries central banks have increased credit rates several times to reduce costs.