In September, China’s factory inflation reached a 25-year high.
China’s factory-gate prices grew at the fastest rate in at least 25 years in September, according to government statistics released on Thursday, owing to soaring coal prices.
According to the National Bureau of Statistics, the producer price index (PPI), which gauges the cost of goods at the factory gate, increased 10.7% year over year.
It was the highest number ever recorded by the National Bureau of Statistics (NBS), which dates back to October 1996.
The numbers come as factory-gate inflation hit a 13-year high in August, reflecting a surge in commodity prices, adding to the burden on businesses already dealing with power outages that impacted output last month.
Many companies have had to shut down as a result of power outages induced by emission reduction targets, rising coal prices, and supply shortages, creating concerns about global supply chains.
Since then, Chinese officials have instructed mines to increase production, as well as energy companies to ensure adequate fuel supply for the winter.
“In September, the price increase of industrial items continued to extend, influenced by factors like as rising coal prices and some energy-intensive industry products,” NBS senior statistician Dong Lijuan said in a statement.
Dong went on to say that 36 of the 40 industrial sectors surveyed had price increases, including coal mining, which saw a 74.9 percent increase.
“The ambitious objective of carbon neutrality keeps commodity prices under pressure, which will be passed on to downstream industries,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Economists warn of the potential of increasing manufacturing inflation as authorities seek measures to alleviate the energy crisis.
The State Council, the country’s cabinet, said this month that power rates will be allowed to climb up to 20% versus a benchmark, which is double the present maximum, making it more viable for electricity companies to increase supply.
Senior China strategist Zhaopeng Xing of ANZ Research predicted that headline PPI will rise, but that “rates for residential users will remain constant.”
For the time being, economists warn that the power outage will have a negative impact on other parts of China’s economy, such as overseas commerce, with supply interruptions potentially affecting supply chains.
Meanwhile, the consumer price index (CPI), a key indicator of retail inflation, came in at 0.7 percent on a year-over-year basis, down from 0.8 percent in August.
Pork prices, which earlier fueled a jump in CPI, decreased 46.9% on an annual basis, according to the NBS.