China’s PPI growth likely jumped above 10% and hit new record high in September, analysts say

China’s of factory-gate prices likely accelerated further in September, with Producer Price Index (PPI) likely jumping above 10 per cent to hit the highest on record, driven by surging commodity prices amid the global energy shortage and China’s production restrictions for energy consumption control, said analysts.

The country’s consumer inflation likely remain below 1 per cent last month mainly dragged by falling food prices, they said.

China’s PPI likely grew by 10.3 per cent in September from a year earlier, 0.8 percentage points higher than August-level, according to average and median estimate by analysts from 16 major financial and research institutions. Their forecasts fall into the range of 9.4 – 11 per cent.

According to data earlier released by the National Bureau of Statistics (NBS), under the official Manufacturing Purchasing Managers’ Index (PMI), the sub-indexes for purchase prices of raw materials and products’ factory-gate prices both expanded at a faster pace to hit the highest levels this year.

Wu Ge, chief economist at Changjiang Securities, estimates that PPI growth accelerated to 10.4 per cent in September. Transformation of global energy structure is accelerating, but renewable energy remains unable to meet energy demand, and meanwhile, energy inventories remain low ahead of the winter heating season, sending energy prices soaring, he said.

Due to China’s national campaign for energy use control, production in energy-intensive industries such as ferrous and non-ferrous metals, chemicals and building materials have been under restrictions, tightening supply of industrial products, he said.

Meanwhile, the economists’ medium and average estimates of China’s CPI growth in September is 0.9 per cent year over year, rising by 0.1 percentage points from August, with their forecasts falling in a range of 0.4 – 1.3 per cent.

Guotai Junan Securities estimated that CPI growth likely slowed to 0.6 per cent last month, mainly dragged by food prices. Pork prices likely decline by 6.7 per cent in September from the previous month and fruit and vegetable prices both dropped, it said.

Wang Tao, Chief China Economist at UBS, said that most Covid-19 related restrictions on people’s movement have been lifted, which helped released consumer demand, and that likely pushed month-on-month non-food price growth to 0.4 per cent. High frequency data showed that average food price fell slightly in September from the prior month, she said.

Wang expects China’s CPI to grow by 1.1 per cent in September from a year earlier.