China factory gate inflation dives as trade war rumbles on

The cost of producing goods in China's factories slowed sharply in December, a sign demand remains weak as the US trade war drags on, while consumer inflation also flagged, official data showed Thursday.

The producer price index (PPI) -- an important barometer of the industrial sector that measures the cost of goods at the factory gate -- rose 0.9 percent on-year in December, compared with a 2.7 percent rise the previous month.

The reading marks the lowest growth since September 2016, and fell short of forecasts in a Bloomberg News survey.

A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits.

It "may enter negative territory very soon given the negative sequential growth it already recorded", Goldman Sachs economists forecast.

"This disinflation is reflected already in the industrial profit data, which entered negative territory," they wrote in a research note.