[econcon]

Isn't it like dead cat bounce, where once demand goes down producers stop producing then supply is reduced even below demand levels, creating hyper inflation?

Usually when production decreases, cost of production increases - operation becomes less profitable and investor might pull their money and take it elsewhere. In some industries, margin might be so thin that once they lose economies of scale which comes with higher production, they simply may go bust or choose to stop, citing higher cost of inputs. This is what pushes the supply below demand level.

Also demand is usually established at some specific price, if cost of production increases, producer might have to increase the price and this might also put downward pressure on demand.

[burroisolator]

If supply drops far below demand, prices rise and producers come back into the market. The process will not be smooth and the feedback mechanism is lagged but hyperinflation should not happen unless some severe structural issues interrupt the process. Note that a decrease in real GDP is not the same as inflation.

[TomMarius]

My thoughts exactly.