In September, China's producer price index (PPI) rose by 5%, exceeding the 4.5% forecast by economists and up from 3.8% in August. This increase was primarily attributed to higher fuel costs and a surge in coal prices due to seasonal demand and supply constraints.
The National Bureau of Statistics noted that the coal sector's performance was influenced by increased demand for winter heating and expectations of rising international coal prices. Meanwhile, consumer prices increased by 0.9%, slightly below the anticipated 1%, with gasoline prices contributing significantly to this rise.
Despite a 16.6% increase in gasoline prices adding approximately 0.47 percentage points to the consumer price index (CPI), a decline in food prices by 1.7% offset some of this inflationary pressure. The core CPI, which excludes food and energy, rose by 1%.
These inflationary trends emerge as China's economy faces its slowest growth in over three years, with GDP growth for the second quarter at 4.3%, below expectations. Recent economic data indicated mixed signals, with retail sales growing slower than anticipated while industrial output exceeded forecasts.
In response to these economic challenges, the State Council has indicated that more policy support may be forthcoming to stabilize growth, aiming for a GDP growth target of 4.5%-5.0% by 2026 and a long-term goal to double GDP from 2020 to 2035, according to Lynn Song, chief economist for Greater China at ING