A striking split has emerged in China’s latest inflation data, with wholesale prices climbing at their fastest pace in over four years while household cost pressures are actually easing.
Producer prices rose 5.7% in October, beating a Reuters poll forecast of 5.3% and marking the third consecutive month of acceleration at the factory gate level.
The reading represents the sharpest rate of wholesale price growth recorded since June 2022, fuelled by a surge in prices across the mining and raw materials sectors.
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, attributed the producer price strength to robust overseas appetite for Chinese goods, telling CNBC’s “Squawk Box Asia” the increase was driven by very strong external demand.
Markets responded positively to the data, with China’s mainland CSI 300 index gaining 0.56% following the release of the October figures.
While factory gate inflation accelerated, consumer prices told a very different story, with China’s CPI slowing to 0.7% in October from 0.9% the previous month.
The consumer reading not only marked the first deceleration after two consecutive months of gains, but also fell short of economist expectations for a 0.8% rise, according to a Reuters poll.
Dong Lijuan, chief statistician of the urban division at China’s National Bureau of Statistics, noted that gasoline remained the single largest upward driver of consumer prices, though its effect was more than cancelled out by a steeper-than-expected decline in food costs.
Core inflation, which excludes volatile food and energy components, slipped to 0.8% from 1.0% in September, adding further evidence that underlying domestic price pressures remain subdued.
Zhang pointed squarely at China’s troubled property market as the central reason consumer demand is failing to generate meaningful inflationary momentum, a sector where he said “there’s no clear sign of stabilization [in that sector] yet.”
The property slump is hitting household confidence and squeezing local government revenues simultaneously, creating a compounding drag on activity that extends well beyond the housing market itself.
Zhang was direct about the broader outlook, warning that “the overall economic momentum has been weak and hasn’t really seen [a] clear sign of recovery,” a sobering assessment despite some brighter recent data points.
China’s economy did expand faster than expected in the third quarter, and retail sales in September delivered a sharp upside surprise, offering at least partial evidence that stimulus measures are beginning to filter through.
Yet the persistent softness in consumer inflation suggests that any recovery remains uneven, heavily reliant on external demand rather than a genuine revival in domestic spending power.
The divergence between surging producer prices and cooling consumer costs poses a policy challenge for Beijing, as officials must weigh the risk of industrial overheating against an economy where household confidence remains fragile.