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ANZ analysts note that the China’s Producer’s Price Index (PPI) contracted by 0.1% m/m in February.

Key Quotes

“The deflation in the PPI will be detrimental to industrial profits, which in turn will dampen wage growth and investment activity.”

“There is some evidence that US-China trade tensions, an external factor over which China has had little control, has weighed on manufacturing goods (midstream) prices which in turn has compounded the weakness in the headline PPI.”

“Since the trade war may result in excess supply for some Chinese industries, this will likely fuel a disinflationary impulse in the country’s PPI which will have spill-over effects for other economies.”

“The contraction in China’s PPI could be broader and deeper if trade tensions extend into the second half of the year.”