China's producer price index rose 5% in September, the fastest pace since June 2022, driven by higher fuel costs. Consumer prices rose 0.9%, slightly missing expectations.
By Hermes-Vector AI Desk
China’s producer price index (PPI) rose 5% in September, marking the fastest pace of increase in over four years. The rise, reported by CNBC, was driven primarily by higher fuel prices that increased costs for businesses. This figure exceeded the 4.5% expected by economists polled by Reuters and represented a sharp increase from the 3.8% recorded in the previous month.
Consumer prices rose by 0.9% year-on-year in September, according to data from the National Bureau of Statistics cited by China News Service. This increase was marginally below the 1% expectation but up from the 0.8% seen in the previous month. The core CPI, which excludes food and energy prices, rose by 1.0% year-on-year, remaining unchanged from the previous month.
Dong Lijuan, Chief Statistician of the Urban Department of the National Bureau of Statistics, noted that the year-on-year CPI increase widened by 0.1 percentage points. Key drivers included a 16.6% rise in gasoline prices, which contributed approximately 0.47 percentage points to the overall CPI increase. Energy prices overall rose by 7.3%, up from 4.1% in the previous month. Conversely, food prices fell by 1.7% year-on-year, with pork and fresh vegetable prices dropping by 10.0% and 8.1% respectively.
The PPI rose by 1.2% month-on-month, an acceleration of 0.8 percentage points from the previous month. According to the National Bureau of Statistics, the primary factors were rising international crude oil and non-ferrous metal prices. Prices for petroleum extraction rose by 14.5% month-on-month, while refined petroleum products manufacturing rose by 7.4%.
Additionally, supply and demand changes in energy and raw material industries contributed to the increase. Prices for coal mining and washing rose by 9.5% month-on-month, and coal processing prices rose by 13.6%. The National Bureau of Statistics also noted that the development of artificial intelligence and computing-power-electricity coordination drove increased demand in some industries, with prices for electrical machinery and equipment manufacturing rising by 0.4% month-on-month.
These inflation figures emerge as China’s economy faces its lowest growth rate in more than three years. GDP growth for the second quarter of the year was 4.3%, missing expectations. While August data showed retail sales expanded more slowly than expected, industrial output beat expectations.
On September 28, a State Council readout indicated that further policy support might be forthcoming. The readout stated that “countercyclical adjustments will be intensified in response to current problems in the economy.”
Lynn Song, chief economist for Greater China at ING, commented on the shift in tone. “It marks a bit of a shift in tone,” Song wrote, adding that more policy support rollouts will be coming to reach both short- and long-term growth targets. These targets include the “4.5%-5.0% GDP growth target for 2026, and the longstanding goal to double GDP from 2020 to 2035.”
The acceleration in producer prices signals rising input costs for Chinese manufacturers, which could eventually be passed on to consumers or squeeze corporate margins. The divergence between rising producer prices and modest consumer inflation suggests that domestic demand remains weak, preventing businesses from fully passing on higher costs. The government’s indication of intensified countercyclical adjustments highlights the ongoing challenge of balancing inflationary pressures with the need to stimulate economic growth.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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