China's producer price index climbed to 5.7% in October, marking the fastest growth since June 2022 and accelerating for a third consecutive month. The figure exceeded the 5.3% forecast by economists polled by Reuters, driven by a sharp rise in mining and raw materials prices. Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, attributed the surge to very strong external demand, according to CNBC.
Consumer inflation painted a contrasting picture, slowing to 0.7% in October after two months of consecutive increases. The result fell short of economist expectations of 0.8% growth and declined from 0.9% in September. Core inflation, which excludes food and energy, dropped to 0.8% from 1% the previous month. Dong Lijuan, chief statistician of the urban division at China's National Bureau of Statistics, noted that gasoline prices provided the largest upward pressure on consumer prices, though this was offset by a sharper than anticipated decline in food costs.
The divergence between wholesale and consumer inflation reflects underlying economic imbalances. Zhang cautioned that domestic demand remains weak due to troubles in the property sector, with no clear signs of stabilization emerging. This weakness has dampened household consumer confidence and eroded local government revenue. He characterised the overall economic momentum as sluggish, lacking any clear indication of recovery despite recent bright spots in growth figures.
China's economy has shown mixed signals in recent months. Third-quarter growth exceeded expectations, and September retail sales data came in sharply ahead of forecasts. Nevertheless, Zhang's assessment suggests these gains have not translated into strengthened domestic consumption. The mainland Chinese CSI 300 index gained 0.56% following the data release.
For Chinese savers and borrowers, the divergence suggests pressure on household incomes and spending power remains constrained despite wholesale price pressures, while businesses face elevated input costs that may not feed through to consumer prices.