China producer prices rise 5pc on oil costs and supply snags, consumer inflation just 0.9pc

Photo: Collected

Although inflation at the consumer level remained comparatively low, prices of goods at the production level in China rose significantly in September.

Official data released on Wednesday shows that production costs are rising because of higher global oil prices owing to the conflict in the Middle East and disruptions in the supply chain.

The news is from news agency AFP.

According to the National Bureau of Statistics of China, prices at the factory-gate level of goods rose 5 per cent last September compared with the same period of the previous year.

This is the highest rate of increase since the middle of 2022.

A Bloomberg survey of economic researchers had forecast that the rate would be 4.4 per cent.

In August the rate of price increase at the producer level was 3.8 per cent; that is, the pace of price rise has quickened further in a single month.

After three straight years of falling prices at the producer level, China’s producer price index (PPI) began moving upward from March. With global oil prices rising in the wake of the Iran war and shipping through the crucial Strait of Hormuz being disrupted, the costs of goods transport and raw materials have gone up.

As a result, the production costs of various goods are also rising.

In the words of Nguyen Hoang Nam, China economist at Capital Economics, ‘Prices of electronic goods have also risen fast because of the rapid expansion of the artificial intelligence (AI) sector worldwide and the shortage of memory chips.’

In an analytical note, however, he writes, ‘Prices are still falling in other categories of consumer goods. This shows that the weakness of domestic demand is keeping overall price pressure down.’

In China, the world’s second largest economy, weak domestic demand has long been an obstacle to growth. Despite various government initiatives to raise consumer spending, the situation has not improved significantly.

In September China’s consumer price index (CPI) rose 0.9 per cent compared with the same period of the previous year; in August the rate was 0.8 per cent. The Bloomberg survey, however, had forecast inflation of 1 per cent in September.

For more than three years, China’s consumer price index (CPI) has remained below the government’s target of 2 per cent.

During this period inflation has also turned negative on several occasions, that is, the overall prices of goods and services have fallen.

With domestic consumption spending weak, China is relying on raising exports to meet its target of annual growth of 4.5 to 5 per cent.

In the second quarter of this year the country’s growth came down to 4.3 per cent.

Then on Tuesday the International Monetary Fund (IMF) lowered its growth forecast for China for 2026 to 4.5 per cent.