China’s factory prices surge, consumer inflation remains weak

The producer price index (PPI), which measures prices at the factory level, rose to 5.7% year-on-year in October, according to the National Bureau of Statistics, up from 5% in September.

This figure, the highest since June 2022, exceeded the median estimate of analysts surveyed by Bloomberg, which was 5.3%.

The ongoing war in the Middle East continues to weigh heavily on energy prices, contributing to rising production costs since February.

“Global energy prices and electronics related to AI continue to be the main factors” driving this PPI increase, Nguyen Hoang Nam of Capital Economics noted in a report.

“We expect the external price shock to persist in the coming months but to fade next year, with production prices returning to deflation.”

Simultaneously, the consumer price index (CPI), the primary gauge of consumer inflation, slowed in October, rising 0.7% year-on-year, down from 0.9% in September.

This was below Bloomberg panelist expectations of 0.8%.

The Chinese government’s target is an inflation rate of approximately 2%.

The Asian giant continues to struggle to regain its pre-pandemic momentum.

It faces deflationary pressures, weak household spending, production surpluses, and a severe real estate crisis.

In contrast to the domestic sector, Chinese exports have served as an economic driver in recent years, particularly due to the surge in demand for artificial intelligence-related products.

Trade figures expected Tuesday are anticipated to show another strong performance for this sector in October.

Peking aims for growth between 4.5% and 5% by 2026, its official target for the lowest growth in decades.

China’s economic growth stood at 4.5% in the third quarter, a slight improvement from the second quarter’s 4.3%.