They show that the prices China’s factories charge to their clients are in a deflationary spiral, while prices charged by retailers to consumers are in an inflationary spiral. China’s producer price index (PPI), which measures costs for goods at the factory gate, dropped at an annual rate of 1.6% in October. In short, the roots of China’s PPI deflation run much deeper than the ongoing trade dispute with the US, to the structure of its economy. Meanwhile, PPI deflation will co-exist with consumer price inflation (CPI), a measure of the change in the cost of living. “The simultaneous decline in PPI and rise in the rise in CPI create a deflation-inflation trap for China’s policy makers,” says Finance Professor Christos Giannikos of Baruch College and Columbia University.

Source: Forbes November 10, 2019 22:43 UTC