(Bloomberg) — The prices that Chinese companies are charging for their production likely rose at the fastest pace in more than two decades last month, driven by the ongoing commodity boom and energy crisis, along with the resurgence of the Covid virus and bad weather.
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The producer price index is expected to rise 12.3% last month from a year earlier, according to the median estimate in a Bloomberg survey of economists, the fastest pace since late 1995. China’s producer prices have risen rapidly in the past few months. , first because of high global commodity prices and then production constraints caused by the energy crisis at the national level.
While the impact of a higher PPI on global inflation is minimal, faster inflation is likely to worsen the situation for domestic firms, especially smaller firms that were already facing higher costs and weak domestic demand. Premier Li Keqiang recently said the government needs to address the problems SMEs face, including costs driven by goods, and further price hikes may add to calls for policy makers to increase subsidies as the economy slows.
What the economists at Bloomberg say…
Government controls on energy use are fueling gains in material prices – driving up inflation at factories’ gate from already very high levels. A jump in vegetable prices may mitigate food deflation — relieving downward pressure on core CPI inflation.”
– Eric Chu
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Consumer inflation, which has remained relatively low due to lower pork prices, is likely to have accelerated to 1.4% in October. The recent rise in vegetable prices is likely to offset some of the deflationary effects of lower pork prices and push up food and consumer inflation for the month.
The expected recovery in the CPI indicates that companies are more willing to pass on higher costs to customers despite weak demand at home. Several food companies have already announced price increases of up to 15%, including Haixin Foods, Anjoy Foods and Jiajia Food, due to higher raw material costs.
The National Bureau of Statistics is scheduled to release inflation data for October at 9:30 a.m. Wednesday Beijing time.
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