China's factory-gate inflation hits near 4.5-year high in October as consumer prices cool

what happened

China's producer price index rose 5.7% year on year in October, up from 5.0% in September, Reuters reported, citing the National Bureau of Statistics. The pace was the fastest in nearly four and a half years and beat the 5.3% gain expected in a Reuters poll of economists.

Consumer inflation moved the other way. The CPI slowed to 0.7% from 0.9% in September, just below the 0.8% forecast, and was flat month on month, as economists had expected. Core inflation, which strips out food and energy, eased to 0.8% from 1.0%.

Higher oil prices, which stayed elevated for much of October, lifted costs in coal mining, oil and gas extraction, refining, chemicals and other energy-intensive industries. Those costs have not yet passed through to consumers because demand remains soft.

why it matters

The gap between producer and consumer inflation suggests companies are absorbing higher input costs rather than raising prices for shoppers. For markets, the data underline how sensitive China's economy is to oil prices, while weak household demand limits room for policy support as authorities also work to slow the yuan's gains and steady the stock market.

market impact

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