The Chinese CPI (consumer price index) rose just 4.9% in August. Although the PPI (producer price index) is more important for OPSA and our customers, the CPI slowdown is significant. It is down from 6.3% in July and 7.7% back in May.
However, as price increases slow, so has growth. Second quarter GDP growth was only 10.1%, down from 10.5% in Q1. I've often read that China needs about 10% growth to maintain a stable employment level. Some economists are now predicting growth will fall to single digits in Q3.
Several economists in China are now calling for economic stimulus to businesses to jump-start growth. The stabilization of the RMB to the USD may be part of this stimulus.
It sure didn't take long to go from talking about an overheated economy, to a slowing one in need of stimulus. I will be watching to see what all the macro developments mean for our business and our customers.
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