China's producer prices hit 5.7% in October, a four-year high, as CPI slips to 0.7%

Producer prices reach a four-year high

China's National Bureau of Statistics said on Monday, 9 November, that its producer price index rose 5.7% year on year in October, up from 5.0% in September. The reading beat the 5.3% expected by economists in a Bloomberg survey and was the fastest growth since June 2022. Higher oil and energy costs pushed up production expenses for energy-intensive industries, and the index has climbed steadily since the Iran war began at the end of February. That ended more than three years of falling producer prices.

In a note after the release, Nguyen Hoang Nam of Capital Economics named energy and AI-related electronics prices as the main forces behind the gain.

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

Producer prices5.7%

Consumer prices0.7%

Core inflation0.8%

Producer prices

5.7 %

Consumer prices

0.7 %

Core inflation

0.8 %

Data from the article text

Consumer prices ease while demand stays weak

Consumer prices rose 0.7% year on year in October, down from 0.9% in September and below the 0.8% forecast in a Bloomberg poll. On a monthly basis the consumer price index was unchanged, after a 0.2% rise in September. Core inflation, which strips out food and energy, eased to 0.8% in October. Both readings sit well short of Beijing's official inflation target of around 2%. Weak household spending limits how far companies can pass higher costs on to shoppers, and the property sector remains mired in a debt crisis that has weighed on demand for years.

Growth and exports hold up

Third-quarter gross domestic product grew 4.5%, a slight improvement from 4.3% in the previous three months. Handelsblatt reports that robust exports supported the figure, which came in stronger than expected. Beijing is targeting growth of 4.5-5% for this year, its lowest goal in decades. Bloomberg reports that the country's Passenger Car Association expects car export growth to slow to about 10% in 2027 after this year's surge, as foreign markets move to protect their local industries. The cross-border yuan payment system CIPS is heading for its busiest year since its launch in 2015, and trade figures due on Monday were expected to show exports stayed strong through October.

Trade truce and US farm purchases

China will suspend an extra 24% tariff on US goods for another two months, formalizing a decision by the two countries' leaders to extend their trade truce until January. The move takes effect at 1:01 p.m. Beijing time on Tuesday, 10 November, and a 10% blanket tariff on US imports stays in place. Chicago soybean futures climbed as much as 0.7% on Monday, their biggest advance since 23 October, as the Trump administration pressed China to follow through on pledges to buy US farm products.

Separately, the Ministry of Finance began marketing yuan-denominated green sovereign bonds in Canada on Monday, the first time China has marketed green bonds there. The offering expands China's offshore debt footprint while ties between the two nations warm.