Sept PPI rises on energy surge

China's producer prices rose at the fastest pace in more than four years amid global energy price increases, while the country's consumer prices remained relatively stable, figures from the National Bureau of Statistics showed on Wednesday.

Analysts said producer inflation could fluctuate at elevated levels throughout the remainder of the year, while consumer inflation is likely to remain mild. The widening gap between the two metrics suggests pressure on profits in midstream and downstream sectors, underscoring the need to bolster demand as its recovery remains lukewarm, they added.

The producer price index (PPI), which measures factory-gate prices, rose 5 percent year-on-year in September, accelerating from a 3.8 percent increase in August, the NBS said on Wednesday. The latest reading marks its highest rate since June 2022, when the figure came in at 6.1 percent, according to the NBS.

Dong Lijuan, an NBS statistician, attributed the price increases to higher international crude oil and nonferrous metal prices, while increased coal stockpiling for winter heating and temporarily tight supplies in major mining areas drove up prices in the mining, washing and processing of coal.

Meanwhile, the consumer price index (CPI), a main gauge of inflation, rose 0.9 percent year-on-year last month, up from 0.8 percent in August. Gasoline prices climbed 16.6 percent, contributing about 0.47 percentage point to CPI growth, the NBS said.

The gap between year-on-year PPI and CPI growth widened to 4.1 percentage points in September from 3 percentage points in August, the largest since May 2022, said financial information provider Wind Info.

Food prices have helped anchor consumer prices, as pork and fresh vegetable prices fell 10 percent and 8.1 percent, respectively, together lowering the year-on-year CPI increase by about 0.33 percentage point, the bureau said.

The core CPI — which excludes food and energy prices and is seen as a better gauge of underlying supply-demand metrics — rose 1 percent, the NBS said.

Analysts said this suggests domestic demand continues to recover at a moderate pace.

Looking ahead, Ming Ming, chief economist at CITIC Securities, said uncertainty remained over how geopolitical risks would affect oil prices, while winter coal stockpiling could continue to support coal prices through year-end. Together with a low comparison base a year earlier, these factors could keep producer prices elevated.

Consumer prices, meanwhile, are expected to continue a mild rise, Ming said, as food prices remain below year-earlier levels. Core CPI growth is likely to fluctuate around 1 percent during the rest of the year, constrained by the pace of recovery in consumer demand, he added.

Su Jian, director of Peking University's National Center for Economic Research, said that an uneven price recovery could squeeze profits in midstream and downstream sectors as lackluster demand made it difficult for businesses to pass on higher upstream costs to customers.

Household income and employment expectations have yet to improve significantly, Su said, adding that persistent sluggish income growth could weigh on consumption and increase near-term downside risks to the economy.

To further bolster confidence and anchor expectations, Su suggested measures such as cutting banks' reserve requirement ratios and encouraging them to lower their deposit rates, which could create room for lower lending rates while easing pressure on banks' net interest margins.

On a month-on-month basis, the CPI rose 0.2 percent, down from 0.4 percent in August, while the PPI rose 1.2 percent, an acceleration from 0.4 percent in August, the bureau added.

A modest recovery in demand was accompanied by slower growth in financing and money supply. Outstanding aggregate social financing, a broad measure of funds provided to the real economy, grew 7.1 percent year-on-year at the end of September, down from 7.2 percent as of the end of August, the People's Bank of China — the country's central bank — said on Wednesday.

Broad money supply, or M2, increased 7.2 percent year-on-year as of the end of September, slowing from 7.5 percent a month earlier, the PBOC said.

zhoulanxv@chinadaily.com.cn