Moreover, despite the efforts of China’s macrodata refiners, some troubling statistics remain. The economy’s apparently brisk growth was accompanied by sustained deflation. Nominal growth, which makes no adjustment for price changes, was only 4.2% last year, once revised data from China’s recent economic census is factored in. That was the second-weakest figure since the 1970s. It implies prices across the economy fell by more than 0.7% last year.
The mismatch between strong GDP and weak inflation strikes many economists as odd.
Why is that odd? If prices come down slightly, that might be the thing that gets a consumer to pull the trigger on a purchase they’ve been thinking about making. And even if the price per unit is down slightly, if volume is up enough, the result is growth.
Why is that odd? If prices come down slightly, that might be the thing that gets a consumer to pull the trigger on a purchase they’ve been thinking about making. And even if the price per unit is down slightly, if volume is up enough, the result is growth.