China’s consumer prices increased 0.2% year-on-year in September, slightly higher than the 0.1% rise in August, according to data released by the National Bureau of Statistics on Friday. The inflation rate was in line with the expectations of analysts polled by Reuters.
China’s food prices fall while non-food prices rise
The main driver of the consumer price index (CPI) increase was the rise in non-food prices, which went up by 0.9% year-on-year in September, compared to 0.8% in August. The NBS attributed the increase to higher costs of education, culture and entertainment, health care, and transportation.
On the other hand, food prices fell by 1.3% year-on-year in September, extending the 1.5% decline in August. The NBS said the drop was mainly due to lower prices of pork, eggs, and fresh vegetables.
Pork prices, which have a large weight in China’s CPI basket, plunged by 19.7% year-on-year in September, as the supply of pigs recovered from the African swine fever outbreak that decimated the country’s hog herd in 2019 and 2020.
China’s producer prices surge to a 13-year high
Meanwhile, China’s producer price index (PPI), which measures the cost of goods at the factory gate, soared by 10.7% year-on-year in September, hitting the highest level since October 2010. The PPI increase was higher than the 9.5% rise in August and also exceeded the Reuters poll forecast of 10.4%.
The NBS said the surge in PPI was mainly due to rising prices of coal, oil and gas, chemical products, non-ferrous metals, and steel. The agency also noted that the PPI growth rate moderated on a month-on-month basis, rising by 0.6% in September, compared to 1.1% in August.
The sharp rise in PPI has raised concerns about the impact of higher input costs on China’s economic growth and corporate profits, as well as the spillover effects on global inflation.
U.S. CPI report awaited amid inflation worries
The release of China’s inflation data comes ahead of the U.S. consumer price index report for September, which is due later on Friday. The U.S. CPI is expected to rise by 0.3% month-on-month and 5.3% year-on-year, according to a Reuters poll.
The U.S. inflation rate has been running above the Federal Reserve’s 2% target for several months, as the economy recovers from the pandemic-induced slump and faces supply chain bottlenecks and labor shortages.
The Fed has maintained that the inflation pressures are transitory and largely driven by base effects and temporary factors. However, some market participants and policymakers have expressed doubts about how long the inflation spike will last and whether it will prompt the Fed to tighten its monetary policy sooner than expected.
The Fed has signaled that it will start tapering its $120 billion monthly bond purchases before the end of this year, but has not given a specific timeline or criteria for doing so. The Fed’s next policy meeting is scheduled for November 2-3.
