China seems to have the need again to take measures for stimulating the economy, after it became known about another sharp decline in selling prices and an unexpected drop in exports.
Producer prices in July reached the lowest level since the end of 2009, after declining continuously for more than three years.
Exports fell 8.3 % last month, the biggest decline in four months, as the weakening global demand for Chinese goods and strengthening of the Yuan press the producers.
"The political attention at this stage is definitely focused on deflation in producer prices", - said Zhou Hao of Commerzbank AG (XETRA: CBKG).
According to him, China's Central Bank has to cut again the rates, which were reduced four times since last November.
Discouragement could intensify in the coming weeks, as it is expected that the next economic data will show a weakening in industrial production, investment and domestic consumption.
Economists believe that the Central Bank will cut rates by another 25 basis points this year and again will reduce banks' reserve requirements by 100 basis points.
The producer price index fell 5.4 % in annual terms, stated the National Bureau of Statistics on Sunday, while analysts expected a decline of 5.0 %. This is the worst performance since October 2009, and the fortieth consecutive month of decline in prices.
The drop in producer prices cause worries, as it reduces the profits of mining companies and manufacturers and increases their debt. China's corporate debt is 160 % of GDP, according to the Thomson Reuters research.
Annual consumer price inflation was 1.6 %, despite the rise in price of pork, which coincided with forecasts of analysts. In June, consumer prices rose 1.4 %.