China's economy is heading deeper into deflation
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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.
- The country is also facing a massive housing bust, the rapid outflow of capital, and a loss of confidence among both domestic businesses and consumers who are uncertain about President Xi Jinping's commitment to economic growth.
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.
- For example, the recent weakness in global crude oil prices is closely tied to the sputtering economy in the People's Republic, the world's largest importer of oil.
