China’s economy has slipped into deflation after consumer prices declined in July for the first time since February 2021.
- The second biggest economy of the world had seen a significant slowdown in economic progress, owing to prolonged period of stringent Covid-19 pandemic induced lockdown.
- Deflation is when the prices of goods and services decrease across the entire economy, increasing the purchasing power of consumers.
- It is the opposite of inflation and can be considered bad for a nation as it can signal a downturn in an economy, leading to a recession or depression.
- Deflation is usually associated with a contraction in the supply of money and credit, but prices can also fall due to increased productivity and technological improvements.
