The deflationary spiral in China’s producer prices that has plagued factories in the mainland for 16 consecutive months highlights the weakening growth momentum in the world’s second largest economy, said economists.
“It is worrying to see the Chinese producer price index remain in deflationary territory – it is the internal weakness in the Chinese economy that has been producing this deflationary pressure on the wholesale price level,” Chi Lo, senior strategist, Greater China at BNP Paribas told CNBC on Tuesday.
The producer price index (PPI) dropped 2.7 percent in June from the year ago period, official data showed on Tuesday, compared to a fall of 2.9 percent in May. Producer prices in China have been declining since February 2012, weighed down by falling commodity prices, overcapacity and weakening demand.
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