China’s still struggling to resuscitate domestic demand. In case that was your burning question mid-week.

Data released Wednesday showed that factory gate prices across the world’s second-largest economy not only spent a 33rd month in deflation in June, but in fact fell 3.6% YoY, considerably worse than expected and the deepest decline since — checks notes — July of 2023.

Dong Lijuan, one of Xi Jinping’s pet statisticians, said exporters are feeling the heat — or I guess feeling the chill’s more apt — from trade uncertainty stoked by Donald Trump’s tariff wars.

As the figure shows, June’s PPI print marked the fourth consecutive month during which factory gate deflation deepened and matched the fourth-worst readout on that score since the economy succumbed in October of 2022.

Among PPI categories showing the largest annual declines, the coal industry notched the most pronounced drop in nearly two decades, as prices plunged more than 20% versus the same period a year ago. Beijing indicated that renewables are replacing demand for “beautiful, clean coal,” as Trump might put it.

Note that the US is moving in the opposite direction: Thanks to Trump’s tax and spending bill, some 350 gigawatts of wind and solar capacity that would’ve been built over the next decade is now in limbo, according to climate think tank Energy Innovation. The Republican budget bill effectively bolsters China’s already monopoly-like stranglehold on renewables.

Anyway, consumer prices in China managed to tick 0.1% higher in Wednesday’s release against expectations for no change, but the blip above the flatline — the first since January — was attributed by the NBS to “industrial consumer goods.” I won’t pretend to know exactly what that means, but it sounds like it could include product categories covered by Beijing’s subsidies scheme which, on some accounts, is pretty much the only thing keeping domestic consumption from petering out altogether.

Recall that China’s implied deflator spent an eighth quarter in deflation during Q1, and a ninth in 10. On Wednesday, a Party official at the NDRC tipped nominal growth for 2025 at just below 4%. Assuming the Party intends to hit the 5% real growth target (and I can assure you they do), the deflator will be negative again this year.

The figure above gives you some context for what Xi’s dealing with partly as a result of his own policy prescriptions.

All of this calls for — indeed, demands — more stimulus. Preferably fiscal stimulus, although the PBoC will almost surely continue to push on the proverbial string despite such efforts being self-evidently futile in a balance sheet recession.

If there was a bright spot in Wednesday’s data, it was core CPI, which showed a 0.7% YoY gain, the briskest in 14 months. Note: Even that would count as a 1.3ppt undershoot versus developed market inflation targets. Measured on a MoM basis, the headline CPI index in China fell in June. It was the second straight monthly decline.