China’s PPI-CPI Gap Widens in October Amid Rising Factory Prices, Weak Demand Recovery

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(Yicai) Nov. 10 -- China’s producer price index expanded at a faster pace last month because of increased prices in some industries, while the consumer price index growth slowed…

(Yicai) Nov. 10 -- China’s producer price index expanded at a faster pace last month because of increased prices in some industries, while the consumer price index growth slowed due to weak demand recovery, widening the gap between the two indicators.

The PPI rose 5.7 percent in October from a year earlier, compared with a 5 percent year-on-year jump the month before, while the CPI inched up 0.7 percent in the period, down from a 0.9 percent growth in September, according to data released by the National Bureau of Statistics yesterday. On a monthly basis, the PPI widened 0.7 percent, down from 1.2 percent in September, and the CPI remained unchanged.

October’s price data continued the overall pattern seen earlier, with a modest performance on the consumer side and structural improvements on the industrial side, Pang Ming, member of the China Chief Economist Forum, told Yicai.

In the consumer sector, prices were still weighed down by falling food prices, while service consumption and core inflation remained stable, he noted, adding that on the production side, momentum accelerated, and prices improved in advanced manufacturing and some industries related to new quality productive forces.

Last month’s data shows that the rise in production prices is mainly concentrated upstream, while consumer prices are still held back by weak food prices, according to China Galaxy Securities.

As the support for upstream prices partly comes from uncertainty from geopolitical tensions, and the weakness in the CPI is mainly due to falling food prices and a slow domestic demand recovery, if the improvement in end demand remains limited and external support from energy prices weakens, future data is more likely to show a pullback in PPI and a stabilization or a slow rise in CPI, Galaxy Securities analyzed.

PPI data shows that supply-demand conditions in some industries improved further, Pang said. Prices in coal mining, coal processing, and photovoltaic equipment and components continued to…

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