![]() Nomura expects consumer prices to fall 0.5 per cent year-on-year in July, even taking into account a potential rise in service inflation as a result of the summer holiday season. ![]() “We think the more challenging deflation environment and sharp slowdown in growth momentum support our view that the PBOC has entered a rate-cutting cycle,” said economists at Barclays in a research note. Further evidence that domestic demand is weak,” Larry Hu, chief China economist at Macquarie Group, told SCMP.Īs Pinpoint Asset Management chief economist Zhang Zhiwei, told The Straits Times, “The risk of deflation is very real.” Momentum in China’s post-pandemic recovery has slowed from a brisk pickup seen in the first quarter with demand for industrial and consumer products weakening, raising concerns about the health of the world’s second-largest economy. ![]() ReutersĪccording to Economic Times, central banks usually counter deflation by increasing the flow of money into the economy.Ĭentral banks also make borrowing easier, increase expenditures and cut taxes to fight deflation. An apple seller looks at her mobile phone at a wholesale market in Changzhi. This feeds on itself – creating what experts refer to as a ‘doom loop’. However, this lack of spending means less income for producers of products which in turn can cause unemployment to rise and interest rates to increase. People, witnessing prices of goods decrease, delay spending. It is monitored via economic indicators like the consumer price index (CPI).ĭeflation can also be caused by the supply of money being reduced or credit availability being lowered, as per Economic Times.ĭeflation occurs when prices of goods and assets go down – thus increasing the purchasing power of consumers.Īccording to Forbes, deflation occurring means a recession could be on the horizon. ![]()
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