China's producer prices surged in October, reaching their highest growth rate in over four years due to rising international energy and raw material costs. In contrast, consumer prices showed a slowdown, falling below market expectations.
According to the National Bureau of Statistics of China, the Producer Price Index (PPI) rose by 5.7% in October compared to the same month last year. This figure exceeds the 5.0% increase recorded in September and surpasses Bloomberg's market forecast of 5.4%. It marks the highest growth rate since June 2022, when it was 6.1%.
The year-on-year increase in China's monthly PPI had been declining for 41 consecutive months since October 2022, during the COVID-19 pandemic, before turning positive again in March of this year with a 0.5% rise.
Analysts suggest that the increase in producer prices reflects the growing cost pressures on manufacturers due to rising international energy prices stemming from instability in the Middle East and seasonal demand increases.
Breaking down the components, the prices of producer goods rose by 7.4% year-on-year, driving the overall PPI increase by approximately 5.77 percentage points. Notably, the upstream industries, such as mining (27.9%) and raw materials (11.6%), saw significant price increases.
The cost of raw materials for producers also rose by 7.9% compared to the previous year, indicating a substantial increase in procurement costs for companies. Specific sectors, including fuel and power (18.6%), chemical raw materials (16.8%), and non-ferrous metals (16.7%), experienced notable price hikes.
Dong Lijuan, a senior statistician at the National Bureau of Statistics, explained that the rise in energy prices and increased demand for heating in winter have driven up prices in major energy-related sectors. She also noted that the rapid development of the artificial intelligence industry has influenced demand and prices for related manufacturing equipment.
On the other hand, consumer prices showed a slowdown. The Consumer Price Index (CPI) rose by only 0.7% in October compared to the same month last year. This is lower than the 0.9% increase in September and below Bloomberg's market expectation of 0.8%.
China's monthly CPI has maintained a low inflation trend, recording near-zero or negative growth rates throughout last year. Although it showed signs of recovery earlier this year with a rise to around 1%, it has recently dropped back to near-zero levels. Factors such as a prolonged downturn in the real estate market and weakened consumer sentiment are seen as constraints on domestic recovery.
In fact, the recovery in consumer spending is not clearly evident even during China's largest shopping event, Singles' Day (光棍节, Shuang11). Despite the discount promotions that began earlier last month, consumers appear reluctant to spend. The transaction volume during Singles' Day is considered a key indicator of domestic consumption and purchasing power in China.
According to data analysis firm Xingtu Data, the transaction volume on e-commerce platforms during the first promotional period of Singles' Day, from October 7 to 31, reached 1.0263 trillion yuan, marking only a 2.4% increase compared to the same period last year.
* This article has been translated by AI.
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