New data in China intensified fears of deepening deflation in the world’s second-biggest economy.
Consumer prices fell more than expected and into negative territory for the first time in months, while factory deflation persisted, adding to the challenges Chinese economic policymakers are facing. The country is grappling with mammoth debt, a real-estate market downturn, high levels of youth unemployment, and a broad economic slowdown.
Deflation is particularly dangerous: When consumers expect declining prices, they hold off major purchases, creating a vicious economic cycle. Beijing has sought to fight this trend by urging against price wars and unveiling stimulus measures, but “it remains questionable to what extent this crackdown will be effective,” ABN Amro economists wrote.
