China Factory Prices Hit Four Year High

China's producer price index jumped to 5.7% in October, marking the fastest annual growth since June 2022. The figure exceeded the 5.3% forecasted by Reuters polled economists and accelerated for the third consecutive month. This surge indicates a widening gap between the cost of industrial inputs and what households actually pay for goods.

The spike was fueled by rising costs in the mining and raw materials sectors. Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, attributed the jump to strong external demand. He noted that domestic demand remains weak, largely due to the property market, which suppresses household consumer confidence and local government revenue.

Consumer inflation moved in the opposite direction, slowing to 0.7% in October. This marked the first decline after two months of increases and fell short of the 0.8% expected by analysts. Core inflation, which excludes food and energy, dropped to 0.8% from 1% in September.

Dong Lijuan, chief statistician of the urban division at China's National Bureau of Statistics, explained that gasoline prices remained the largest contributor to the consumer price increase. However, this was offset by a sharper than expected fall in food prices.

The data release followed a period where the Chinese economy showed signs of expansion, including faster than expected third quarter growth and a strong September retail sales figure. Following the announcement, the mainland Chinese CSI 300 index gained 0.56%.