China’s factory-gate prices rose 5.7% in October from a year earlier, marking their fastest pace in more than four years.
Surging energy costs escalated production expenses as the producer price index climbed sharply from September’s 5.0% increase. The National Bureau of Statistics released this data on November 8.
The reading surpassed the median forecast of 5.3% from a Wall Street Journal poll of economists. It represents the largest annual rise since June 2022, when producer inflation reached 6.1% according to LSEG data.
Upstream price pressures stemmed from international energy markets. Elevated energy costs stemming from the conflict in the Middle East drove up expenses for chemicals, coal mining, the extraction and processing of oil and natural gas, and other power-hungry industries.
Raw-material purchase prices surged 7.9% from a year earlier, the biggest increase since June 2022. Fuel processing, oil and gas production, and coal mining were among nine sectors that accounted for upwards of 6 percentage points of the total increase in producer prices.
The consumer price index rose by 0.7% year-on-year in October, cooling from September’s 0.9% increase. This missed economists’ expectations for a 0.8% rise.
Core inflation eased to 0.8% from 1.0% in September. Gasoline contributed the most to the consumer price increase, but that gain was offset by a sharper-than-expected fall in food prices, CNBC noted based on statements from Dong Lijuan, chief statistician of the urban division at China’s National Bureau of Statistics.
The CPI inflation stayed at a low level which reflects that domestic demand remains weak. We have not seen significant policy stimulus so far. Export growth has been phenomenally strong, which may be the reason why China is not in a rush to launch new stimulus,
Zhang Zhiwei, chief economist at Pinpoint Asset Management, via CNBC and Reuters
Companies faced price competition, which limited their ability to pass higher costs on to finished goods prices. Producer prices rose in only half of the country’s 30 major industries.
External price shocks linked to artificial intelligence goods and energy drove the jump in producer prices, according to Bloomberg Economics economist Eric Zhu. Consumer inflation demonstrated ongoing deflationary pressure throughout most of China’s economy beyond the technology and energy domains.
We think the price shock from the Middle East conflict will keep inflation elevated over the coming months. But its impact should fade next year,
Nguyen Hoang Nam, China economist at Capital Economics, via Reuters
Nguyen Hoang Nam expects a return to deflation in producer prices, while projecting consumer inflation would average 0.4% in 2027. The mainland Chinese CSI 300 index gained 0.56% noted CNBC.
