China's September PPI Rises 10.7% YoY, Largest Increase in 25 Years (Summary)

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Suhwan] China's Producer Price Index (PPI) has risen at the largest rate in 25 years since 1995. Analysts attribute this to the global energy supply shortage and the sharp surge in coal prices, which have driven up the PPI.

China's National Bureau of Statistics announced on the 14th that China's September PPI increased by 10.7% compared to the same period last year.

Bloomberg reported that the September PPI rise exceeded market expectations of 10.5% and marked the largest increase since 1995.

After the PPI rose 9.5% year-on-year in August, the rate of increase has been expanding.

China's PPI had been continuously declining due to the impact of the COVID-19 pandemic last year but rebounded in January this year and has been rising steadily since then.

Experts analyzed that the surge in raw material prices caused China's PPI to spike sharply.

Additionally, the coal supply shortage in China, coupled with increased electricity demand ahead of winter, has intensified the power shortage, which has been identified as a factor pressuring the PPI upward.

In particular, amid soaring raw material prices, the Chinese government's stringent electricity price cap policies have increased losses for power companies, leading these companies to reduce supply, which further aggravated the power shortage.

In response, last week the Chinese government announced plans to raise the price increase cap for power suppliers to 20%, double the previous limit, to boost power supply.

Experts analyzed that rising energy prices are putting upward pressure on the PPI.

On the same day, an analyst warned in an interview with the South China Morning Post (SCMP) that "the electricity price increase will raise China's PPI by an additional 1 percentage point."

As producer prices continue to rise, there is analysis that consumer prices are also facing inflationary pressure.

China Renaissance, an investment bank in Hong Kong, stated, "Manufacturers are increasingly likely to pass on the cost burden from rising prices to consumers."

They added, "China's annual PPI growth rate is expected to reach 9% this year," forecasting that the PPI will continue to rise over the coming months.

Meanwhile, China's September Consumer Price Index (CPI) rose 0.7% year-on-year, falling short of the expected 0.8% increase.