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 deflation, good news for consumers abroad, perhaps, but indicative of a pallid, frail conjuncture at home.

Core CPI rose 0.4%, marking a slowdown from the final month of 2023. Food prices fell the most on record, driven by pork.

Simply put, the world’s second-largest economy sank deeper into deflation last month, underlining concerns about domestic demand and undermining the Party’s claims of stability.

The data comes on the heels of another lackluster read on factory activity and amid Beijing’s increasingly desperate efforts to put a floor under local equities which, notwithstanding a few days of gains, are parked at multi-year lows.

Consumer sentiment is absolutely abysmal. Some readers will recognize the figure above from a recent Weekly. Suffice to say Chinese never got over the Shanghai lockdown. And Xi’s point man for that lockdown is now Premier.

The PBoC can’t fix this. The problem’s not credit supply. The problem, rather, is an acute confidence crisis and legacy drag from the property crackdown.

Local governments are over-leveraged and thereby constrained in their capacity to spend. The proverbial writing on the wall could scarcely be any bigger: The central government needs to embark on ambitious fiscal stimulus, including some version of helicopter money, and they need to do it soon.

I’m reminded of an exchange I had with a reader last year when I suggested, repeatedly, that China was in a recession and likely to remain so in perpetuity. You can’t judge a recession in China by the headline growth figures, particularly not now. The deflator, you’ll recall, was negative for a third consecutive quarter in Q4, the longest such stretch since 1999.

Bottom line: Xi’s in the process of squandering one of history’s greatest economic miracles. For the glory of a dead dictator.

Related: How Worried Should The World Be About China’s Economy?