The market has spent so long fretting about inflation it feels discombobulating to suddenly switch attention to deflation.
AJ Bell investment director Russ Mould said: “However, that’s what the latest data has revealed in China, raising further questions about the recovery of the world’s second largest economy from its zero-Covid stasis. Premature comparisons are being made with Japan, which faced lost decades after an economic boom in the 1990s.
“Given the broader disinflationary impact on the global economy though, these latest figures may give central bankers in the US, UK and Europe pause for thought when they weigh up their next steps. They cannot afford to repeat their earlier complacency over surging prices but they will want to avoid overdoing it, inflicting too much economic damage and perhaps being forced to undo their hard work by cutting rates before they’re ready to.
“Interestingly the FTSE 100 was higher this morning with firms whose fortunes are traditionally tied to China enjoying gains, perhaps amid hopes of further Chinese stimulus to get the economy moving.”
