China’s Factory-Gate Deflation Deepens As Trade War Drags On

China’s factory-gate prices fell at their fastest pace in six months in April, while consumer prices declined for a third straight month—highlighting growing deflationary pressure amid an ongoing trade war with the United States, Reuters reported.

The Producer Price Index (PPI) dropped 2.7% year-over-year in April, deeper than March’s 2.5% decline. I Photo: Xinhua

The economic slowdown has been fueled by a prolonged housing slump, high household debt, and weak job confidence, all of which have hampered consumer and business spending.

Now, intensifying trade tensions are further weighing on growth prospects.

However, there is a glimmer of hope: U.S.-China trade talks are set to begin in Switzerland on Saturday.

According to China’s National Bureau of Statistics, the Producer Price Index (PPI) dropped 2.7% year-over-year in April, deeper than March’s 2.5% decline but slightly better than economists’ forecast of a 2.8% drop.

“China still faces persistent deflationary pressure,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The pressure may rise in the coming months as exports are likely to weaken.”

Zhang also noted that even if trade talks succeed and some tariffs are cut, a return to pre-April levels is unlikely. Reporting by Qiaoyi Li, Sophie Yu, Ryan Woo, and Zhiwei Zhang.