CNBC
China’s producer prices fall 3.6% in June, biggest drop in nearly two years as deflation deepens
China’s producer prices plunged 3.6% in June from a year earlier, marking its largest decline in nearly two years, as a deepening price war rippled through the economy that’s already grappling with tepid consumer demand.
The consumer price index edged 0.1% higher in June from a year ago, . . .
Last week, Chinese policymakers, in a top economic policy meeting chaired by President Xi Jinping, criticized the excessive price competition by Chinese companies to entice consumers and clear excess inventory, as the U.S. tariff onslaught has threatened the viability of selling to the world’s largest consumer market.
Beijing pledged to tighten regulations on such aggressive price-cutting . . .
It’s the change of direction that earned my attention and all while the “tariff factor” entered into the equation. Now I understand that “swooooooooooosh” sound I heard a tad ago.
“China’s export growth has shown some resilience in recent months, even as the erratic U.S. tariff policies disrupted global trade. Chinese overall exports rose 4.8% in May and 8.1% in April, thanks to a surge in shipments to the Southeast Asian nations that largely offset the shrinking U.S.-bound goods.”
Import volume, some of which is seasonal dropped 50% from the local high a few months ago.
Clearly only part of that is seasonal.
It should not be contentious to say that a 50% drop in sales to their biggest customer led to a 3.6% drop in producer prices.
Best guess:
China formally ended its “zero-COVID” policy on January 8, 2023
The month they reopened (after nearly two years) they had a pile of labor and a pile of unsold unfinished inventory. If that was the dominant factor then supply and demand would suggest lower prices.
