China's Producer Prices Fall, Indicating Its Government Has Room To Take Stimulus Action As It Faces Worst Wholesale-Cost Deflation Since 2009

Monday, October 22, 2012 20:15
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China's Producer Prices Fall, Indicating Its Government Has Room To Take Stimulus Action As It Faces Worst Wholesale-Cost Deflation Since 2009

Tags: China | global investing | world economy

China’s producer price index fell 3.6% in September and may continue to decline until the second half of 2013 if no further stimulus action is taken.
 
The US is reporting the longest time span in three years without a price increase on Chinese imports. China’s gross domestic product also slowed for a seventh straight quarter.

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It expanded 7.4% from last year’s third quarter. This is lower than the second quarter’s 7.6% growth rate.
 
Prices on Chinese imports rose almost every month from September 2010 to February 2012 but have either declined or remained unchanged since then.
 
It’s the worst wholesale-cost deflation in China since 2009 but the worst of it may be over. The reduced inflation pressures from the lack of upward price movement give the government the room it needs to provide stimulus to China’s economy.
 
Earnings at Chinese companies is down 6.2% from August of 2011. This is the largest decline so far in 2012 and the fifth consecutive monthly drop. September’s data will be reported October 27.
 
China’s slowing economy is putting pressure on other global economies, especially those who depend heavily on China’s purchases of their products. Demand from China has also cooled.

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