BEIJING: China’s factory gate inflation hit a 26-year high in October as coal prices rose amid a power crunch in the country’s industrial sector, further narrowing profit margins for producers and rising inflation concerns. Hui.
The National Bureau of Statistics (NBS) said in a statement that the producer price index (PPI) rose 13.5 per cent from a year ago, up from 10.7 per cent growth in September.
This matched a pace not seen since July 1995 and was faster than the 12.4% forecast by analysts in a Reuters poll.
Consumer price growth also accelerated, albeit at a slower rate than factory gate prices. The Consumer Price Index (CPI) rose 1.5% year-on-year in October, compared to a 0.7% increase in September.
Rising price pressure has complicated deliberations for the People’s Bank of China, which is now reluctant to quickly inject monetary stimulus amid concerns about easing inflation despite slowing growth in the world’s second-largest economy. can be careful.
“We are concerned about the transition from producer prices to consumer prices,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note.
He added that consumer prices are likely to pick up in the coming months as firms are facing low inventory and passing higher cost burden to customers.
“The risk of inflation is rising.”
Slow economic growth and rising factory inflation have raised concerns over stagflation, which could mean China will have to proceed cautiously on easing monetary policy.
“Rising CPI inflation and increased PPI inflation reduce the likelihood of a PBOC policy rate cut,” said Ting Lu, chief China economist at Nomura.
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Upstream industries increased factory gate prices, coal mining and washing prices increased 103.7% from a year ago, and prices in the oil and gas extraction industry rose 59.7%.
Restrictions on carbon emissions and rising prices of coal, a major fuel for power generation, led to power rationing and production cuts in recent months, although coal prices have plummeted following government intervention.
“Factory gate inflation is probably close to peak,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note, citing the collapse in coal prices.
Several Chinese food giants have announced an increase in retail prices in recent weeks, as rising production costs reduce profit margins. Foshan Haitian Flavoring & Food, vinegar producer Jiangsu Hengshun and frozen food firm Fujian Enjoy Foods have all hiked prices.
PPI grew by 2.5% on a monthly basis as compared to 1.2% in September.
Core inflation, which separates volatile food and energy prices, rose 1.3% in October over the previous year, higher than the 1.2% increase in September.
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