The Number That Makes China Look Like Europe Is Out

Slowing consumer demand has been hurting Chinese companies already suffering from thinning margins, and it looks like the pain isn’t ending any time soon.

Thursday night at 8:30 PM EST, China released December figures for its producer price index (PPI) and consumer price index (CPI). These are numbers associated with inflation.

PPI came in at -3.3%, missing analyst expectations, and CPI came right in line at 1.5%.

Analysts polled by Bloomberg expected CPI to come at around 1.5%, as opposed to 1.4% at the same time last year. PPI was estimated to come in at -3.1% as opposed to -2.7% at this time last year. 

These numbers are key for tracking a potential global demand slow down, and economists are especially worried about that since deflation has taken hold in Europe officially.

In China, economists like Societe Generale’s Wei Yao are especially watching PPI. PPI tells us how much money producers are getting for their goods. That, she argued in a note last year, is the number that best reflects the country’s specific deflationary problems — problems that the government has done little to combat.

“China’s debt problem lies with the corporate sector, and so PPI deflation can cause more damage to debt dynamics than CPI deflation. The cure should be capacity consolidation and debt restructuring, rather than
another stimulus package targeted to boost investment demand,” she wrote.

But for now the damage will continue.

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