The Chinese economy continues to fight with a weak price development. The producer prices have fallen significantly again, while consumers have only minimally increased, as the statistics office in Beijing announced on Wednesday.
At the manufacturer’s level, prices fell by 3.6 percent in the year in June. It is the 33rd decline in a row and the strongest minus in almost two years. Analysts only expected a decline of 3.2 percent. The statistics office partly justified the significant minus by the fact that unfavorable weather conditions affected the construction work and put pressure on raw material prices.
Overall, the headwind from world trade put on the export -heavy sectors. The prices in the processing industry for computers, communication and other electronic devices according to the information accelerated the decline compared to the previous month. According to experts, the imponderables of customs policy of US President Donald Trump continue to spoil the prospects for companies that depend on the global markets, since the domestic demand remains weak.
Consumers: Interior prices increased by 0.1 percent in June per year. Here it was expected to give in 0.1 percent as in the previous month. According to experts, however, the slight recovery is more likely to reflect the short -term effect of state subsidies than a permanent recovery.
The producer prices tend to influence consumers: internal prices. In this respect, the data increased the concerns of deflation risks in the second largest economy in the world.
Deflation is the opposite of inflation. A decline in the price level leads to buyers: getting more for their money inside. Economists consider such development to be harmful in the long term. Because consumers are more back when buying goods, hoping for further falling prices. That can paralyze the economy.
“Deflation remains a problem,” wrote Lynn Song, chief economist for China of Bank Ing. The main reasons for this included a strong price competition as well as wage stops and wage cuts. The political decision -makers: Inside, however, attention to the solution of the problem would have drawn attention by improving the market exemption mechanisms, promoting the consolidation and restructuring of the companies and doing non -market practices that led to an excessive price competition.