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Xi’s Macro Problems Pile Up As Deflation Deepens
There was more bad macro news out of China on Thursday. The drumbeat of despondency is unceasing.
To be sure, no one expected an encouraging update on consumer prices out of Beijing, but the CPI print for January was considerably worse than expected.
Prices fell 0.8% YoY last month, far deeper than the 0.5% decline economists expected. It was the most feeble read since 2009.
Producer prices, meanwhile, slipped 2.5% from a year ago. China's spent the last 16 months mired in factory gate deflat
There was a good video a while back by Michael Pettis about China’s path forward. He has spent a lot of time in China. His guess is that China will choose the long drawn out work out for over investment just as Japan did. Too much short term pain for the people otherwise. https://www.youtube.com/watch?v=XO8o0TO-rfg
At this point, deflation out of China is good news for most of the world… A potential problem for nations too closely tied to the Chinese engine maybe (Germany, Australia?) but pretty useful for the rest of the world…