By December, conventional wisdom – and Chinese growth data – was exploding fast. Exports fell 2 per cent year on year in November, or by 10 per cent if you strip out currency appreciation. Industrial production plunged to a record low.
Deflation is speeding round the corner: the consumer price index has fallen from 8.7 to 2.4 per cent in under 10 months, and factory gate prices increased a thin 2 per cent in the year to November.
None of these readings are a blip. With virtually all the developed world in recession – the main end-buyers of Chinese goods – tumbling exports are not going to reverse any time soon. Excess capacity in the manufacturing sector, meantime, suggests deflation could be about more than just cheaper food bills.
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