China’s factory-gate inflation accelerated in September to its fastest pace in more than four years, as rising oil and commodity prices increased costs for manufacturers despite relatively weak consumer price growth.
The producer price index (PPI), which measures prices charged by factories, rose 5% year-on-year, up from 3.8% in August, according to official data released on Wednesday, October 14. The increase exceeded economists’ forecast of 4.5% and marked the strongest annual rise since June 2022.
Higher energy and raw material costs contributed to the increase, with fuel processing, chemicals and non-ferrous metals among the sectors experiencing significant price pressures. Disruptions linked to geopolitical tensions in the Middle East have pushed up commodity prices, raising expenses for businesses.
Consumer inflation, however, remained comparatively subdued. China’s consumer price index (CPI) rose 0.9% year-on-year in September, compared with 0.8% in August, falling short of the 1% increase economists had expected. On a monthly basis, consumer prices increased by 0.2%.
The divergence between producer and consumer prices highlights a challenge for China’s economic recovery. Manufacturers are facing higher input costs, but weak domestic demand may limit their ability to pass those increases on to consumers.
If elevated commodity prices persist, businesses could face further pressure on profit margins, while households may eventually encounter higher prices for some goods.
The latest figures underline the uneven nature of China’s recovery, with rising industrial costs contrasting with modest consumer inflation.
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