chrislbecker.com

Some more great evidence that the Chinese economy remains in a business cycle bust phase was released last night.

China’s official CPI inflation rate slowed from 3% y/y in May to 2.2% in June, the lowest in 29-months, reports Bloomberg. The China PPI remained in deflation, falling 0.7% m/m and 2.1% y/y. This is the fourth straight month of outright deflation that has pushed the PPI to a 31-month low.

With PPI declining faster than CPI, it confirms the production structure is collapsing, that the malinvestments created in the capital goods sectors during the credit and money boom are liquidating, and that capital is flowing back to lower order sectors.

As they did with Brazil, mainstream economists are also missing the extent of the Chinese economic downturn.