According to data released by the National Bureau of Statistics, China’s PPI has declined 0.3% YoY in July 2019. Market expectations were for a decline of 0.1% after PPI stayed at 0 for the month of June.

For the first time in three years, factory gate prices in China shrank over weakening demand in external as well as domestic markets. The trade war with the US has forced manufacturers in the country to cut prices even as they fight to retain their market share, causing a reduction in their profit margins. As a result, fresh investment into the sector has also fallen lower.

Producer price index (PPI) is a leading gauge of corporate profitability and offers insight into the level of business confidence within an economy. This is the second time that China’s PPI has declined for two consecutive months, however, June’s figures were the first contraction YoY seen since August 2016.

Will China implement more stimulus measures to support the economy from weakening further on account of the trade war?