China’s factory-gate prices, the Chinese equivalent of the U.S. Producer Price Index, grew at the fastest pace in 26 years in October. Factory inflation climbed 13.5% year over year, the National Bureau of Statistics reported Wednesday.(Economimsts had projected a 12.3% year over year increase.) Raw material costs continued to soar, with signs that producers are passing on higher costs to consumers.
China’s consumer inflation rose by 1.5% in October, the fastest pace since September 20202. Economists had projected a 1.4% rate.
The data “implies broad-based inflation pressure on both the production side and the consumer side,” Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong told Bloomberg. “Inflationary pressure and the more hawkish stance of monetary policy in other major economies will likely limit China’s room to maneuver for monetary easing.”
The data does indeed leave the People’s Bank in somewhat of a bind. The inflation data would normally prompt an increase in interest rates to slow the economy. But the bank is worried that China’s economy is already slowing and has moved in recent months to stimulate growth by easing monetary conditions. The next move, economists expect, will be another cut to bank require requirements, which would pump more cash into the economy.
Back in the United States, producer price inflation is running at an annual rate of nearly to 9%. Wednesday brings the next report on U.S. consumer inflation.