Dec 12, 2023 - Economy

China's economy is heading deeper into deflation

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

Prices in China continued to fall during November, as the People's Republic slips into a deflationary funk.

Why it matters: Deflation is a manifestation of the deep problems within the world's second-largest economy.

The big picture: China's economy has stumbled as it tried to emerge from the government's zero-COVID lockdown policies.

Yes, but: While most of the decline in prices was driven by swings in more volatile food and energy categories, the underlying "core" inflation reading was also unimpressive.

  • China's core CPI was up 0.6% year over year, essentially flat.

What they're saying: "The lingering softness in core CPI suggests domestic consumer demand conditions may have remained weak," wrote JPMorgan analysts of the recent report on prices.

  • "Core CPI inflation remained weak, likely reflecting sluggish domestic economic momentum in the near term," wrote Goldman Sachs analysts.

The bottom line: Such deep issues in an economy this large will ripple out into world markets.

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