China releases consumer and producer price data for September at 0130 GMT on Wednesday, which is 9:30 pm US Eastern time on Tuesday. Factory-gate inflation is the reading most likely to move markets, as higher global energy costs continue to feed through the economy.
August sets the benchmark. Consumer prices rose 0.8% y/y, up from 0.5% and in line with forecasts, while the 0.4% monthly gain beat expectations. Producer prices climbed 3.8% y/y from 3.5%, with the statistics bureau pointing to rising energy prices.
There are three things to watch.
The first is producer prices. The August increase reflected imported inflation, with higher crude oil and non-ferrous metal prices lifting petrochemical and smelting prices at home. Another firm print would confirm that the oil shock is still working its way through Chinese input costs.
The second is pass-through to consumers. Headline CPI remains well short of Beijing’s informal target of around 3%. Analysts warn that a weak property sector and soft consumption make it hard for downstream manufacturers to pass on higher costs, and that factory prices could slip back towards deflation once supply-side support fades. A widening gap between strong PPI and modest CPI would point to a squeeze on margins, not demand-led inflation.
The third is core CPI, which excludes food and energy. It gives the clearest read on whether domestic demand is firming or whether energy is doing all the work.
Trade figures for September are also on the calendar. In August, exports rose 18.6% y/y and imports 21.7% in yuan terms, with import growth outpacing exports for a sixth straight month. The dollar-denominated surplus was around $119 billion.
For markets, a hot PPI would add to signs that China is passing higher goods prices on to the rest of the world after years of exporting disinflation. A soft CPI would keep the focus on weak household demand and support the case for further policy easing.
This article was written by Eamonn Sheridan at investinglive.com.
