China’s October inflation data, released on November 9, showed producer prices rising 5.7% year on year, the fastest pace since June 2022. Consumer prices, by contrast, rose more slowly: the consumer price index (CPI) increased 0.7%, down from 0.9% in September.

Producer prices track what factories receive for their goods. They accelerated for a third consecutive month, after rising 5% in September. October’s increase was higher than both the 5.3% median forecast in Bloomberg’s survey and the 5.3% forecast in a Reuters poll. Consumer inflation came in below the 0.8% increase economists polled by Reuters had expected.

Factory-gate prices and consumer prices move differently

CNBC reported that a sharp rise in prices in mining and raw-material industries drove the increase in producer prices. Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, attributed the rise to very strong external demand.

The consumer-price measure tells a different story. Prices were still rising year on year, but at a slower rate than in September. Core inflation, which excludes food and energy, also eased, falling to 0.8% from 1% in September. Bloomberg reported that the figure matched this year’s low.

Food prices offset some of the consumer-price rise

Dong Lijuan, chief statistician of the urban division at China’s National Bureau of Statistics, said gasoline prices made the largest contribution to the increase in consumer prices. A sharper-than-expected fall in food prices offset some of that rise.

The figures therefore show rising producer prices alongside a slower increase in the prices consumers pay. They do not, on their own, establish how much of the producer-price rise will feed through to household prices.

Zhang links weak demand to the property market

Zhang said weak domestic demand, which he linked to the property market, was a key reason inflation was not picking up. He said there was no clear sign of stabilization in the sector, which he said was weighing on household consumer confidence and local-government revenue. He also described overall economic momentum as weak, with no clear sign of recovery.

That assessment sits alongside other signs of expansion: China’s economy grew faster than expected in the third quarter, and September retail sales sharply beat expectations, CNBC reported. The mainland CSI 300 index gained 0.56% after the inflation data were released.