The bad economic news coming out of the People’s Republic of China could be good news for America as it struggles to get inflation under control.
- Newly released data on Monday shows that China is on the verge of a deflation crisis, with prices falling and consumers putting off non-essential spending.
- China’s Consumer Price Index for June came in at 0% year-over-year, with producer prices falling 5.4% in the past 12 months.
- Annual producer prices have continued to sink for nine months, despite consumer prices remaining unchanged—with June marking its steepest since December 2015, according to CNBC.
- Declining favors for the world’s largest manufacturing producer will have effects on the global economy, potentially easing tension on the U.S. dollar, Axios reports.
- America’s current inflation rate is 4%, but new data from the Bureau of Labor Statistics on Wednesday could reveal it to be lower.
Why It’s Important
With the Chinese economy continuing to reel from the effects of the “ZERO COVID” policy, investors fleeing the country, manufacturers like Apple turning towards India, and growth stagnating, the Chinese government has found itself in a dangerous situation that could escalate if it does not stem the bleeding. The country is already staring down a dangerous demographic decline and troubling future prospects.
A Chinese currency could be beneficial to the U.S. China remains the largest industrial hub in the world, and its problems will affect the U.S., as the breakdown of the supply chain in 2020 proved. Declining currency means exports will decline, lowing demand for materials and lowering commodities prices, which could heavily affect U.S. consumer prices, Axios notes.
As we previously reported, recent Pew Research studies have suggested that global opinions are looking back toward America once again as the dominant economic superpower.
“I think today’s numbers [are] actually lower than expectation, especially in the consumer part of the inflation equation–it’s actually entering a deflationary zone. Right now, I think the government is still debating how best to help the economy. In the second quarter, the economic numbers are going to be stronger than the first quarter because of a lower base. Therefore it’s unlikely that we are going to see immediate rescue for the economy,” Grow Investment Group economist Hong Hao tells CNBC.