China’s producer price index deflation deepens midst export and import slump

Factory gate prices in May in China fell at their steepest rate in more than 4 years, underscoring growing pressure that faces the country’s manufacturing sector following the COVID-19 pandemic which began in Wuhan, China.

The pandemic has ravaged key export markets for China, including the United States and Europe; the pressure is likely to further worsen the outlook for investment in the manufacturing sector along with jobs in what is currently the world’s second-biggest economy.

China’s producer price index (PPI) fell by a record 3.7% in May compared to a year earlier, said the National Bureau of Statistics (NBS) in a statement on Wednesday; this is the sharpest decline since March 2016.

China’s exports in May contracted significantly while a deeper fall in imports is a pointer to mounting pressures in its key manufacturing sector.

Private factory surveys along with official ones also indicate a deep contractions in export orders.

To prop up its economy, which contracted for the first time on record for the January to March period, in recent months China has rolled out fiscal and monetary stimulus, and has not set a growth target for 2020, which implies uncertainty surround Beijing’s stimulus efforts.

Weak economic readings is likely to add further pressure on policymakers, who are likely to provide additional support measures to meet job creation and unemployment targets for the year.

A falling consumer inflation will provide some cushioning to Beijing for introducing more stimulus measures to offset the impact of the coronavirus, on its economy.

Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Strategy

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