China is dealing with severe deflation: China’s producer prices (PPI) dropped -3.6% YoY in June, the sharpest decline since July 2023. This also marks the 33rd consecutive month of factory-gate deflation, one of the longest streaks on record. Meanwhile, the consumer price index (CPI) increased +0.1% YoY, ending a four-month decline. However, excluding precious metals, CPI remained in deflation. Weak domestic demand, overcapacity, and price wars continue to weigh on prices. China's deflationary spiral is intensifying.