China: Slowdown Worries Intensify, Producer Prices Stay Negative
US Employment Strengthens as China's Inflation Stays Low
Producer prices fall by 5.9% year-over-year
Producer prices measure the change in prices paid by businesses. According to the National Bureau of Statistics of China, producer prices in China dropped by 5.9% YoY (year-over-year) in December 2015. For the fifth consecutive month, producer prices have stayed at the level of 5.9%, slightly below the market consensus of a decline of 5.8%.
As a result, the iShares China Large-Cap ETF (FXI) and the Direxion Daily FTSE China Bull 3X ETF (YINN) had fallen by 1.0% and 2.9%, respectively, as of January 8.
Decline in mining activities keeps producer prices low
In December, the means of production declined by 7.6% and the means of subsistence fell by 0.4%. The decrease in producer prices in the mining and quarrying industry by 19.7% and the raw material industry by 10.3%, followed by a decline in mining by 5.4%, were mainly responsible for the low production prices in China.
China Petroleum & Chemical (SNP), PetroChina (PTR), Aluminum Corporation of China (ACH), and China Gerui Advanced Materials Group (CHOP) fell by 6.8%, 12.9%, 1.3%, and 29.4% in the month leading up to January 8.
Food, general commodities, and consumer durables fell by 0.1%, 0.9%, and 1.1%, respectively, in December. Clothing was up by 0.7% on a yearly basis.
Chinese producer prices fall 0.6%
China’s industrial producer prices were down by 0.6% in December on a month-over-month basis. The fall was mainly led by decreases in prices of mining by 2.7% and raw materials by 1.1%. Food and clothing increased by 0.1% each, which positively contributed towards producer price changes in December.
While manufacturing activity in China is slowing down, the People’s Bank of China has devalued the yuan to boost export demand. However, this attempt has added to concern over the Chinese economy. Chinese stocks were volatile and have plunged as worries over China slowdown intensifies.
To learn more about the Chinese economy, please read China’s Manufacturing Deteriorated Further in December 2015. For updates on the economic front, please refer to our Global ETF Analysis page.
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