China’s factory gate deflation worsens on suffering demand China factory gate deflation worsens on suffering demand

China’s producer prices recorded a historic drop in more than four years. This indicated that the country’s manufacturing sector is struggling as the novel coronavirus crisis curbed trade flows and dragged global demand.

The producer price index (PPI) dropped 3.7% in May from a year earlier, the National Bureau of Statistics (NBS) said in a statement on Wednesday. The figure came to be the worst drop since March 2016, beating the 3.3% drop speculated by analysts. This also surpassed the 3.1% decline monitored in April.

“Negative reading for PPI is likely to be a new normal in the foreseeable future,” said Tommy Xie, China economist at OCBC Bank in Singapore.

The coronavirus pandemic has dragged trade to China’s key export markets including the United States and Europe. This has led to a dimmer outlook for manufacturing investment and jobs in the world’s second-biggest economy.