CN: Producer Price Index

Wed Jul 08 20:30:00 CDT 2015

Consensus Actual Previous
Y/Y % Change -4.6% -4.8% -4.6%
M/M % Change -0.4% -0.1%

Producer prices deflated for a 40th consecutive month, dropping 4.8 percent from a year ago in June. In May, the PPI was down 4.6 percent. The sustained decline in producer prices reflects the downturn in China's housing market, which had led to excess supply of the materials used in the housing boom.

The PPI was down 0.4 percent on the month and 4.6 percent for the year to date. Raw materials procurement, fuel & power dropped 5.6 percent while consumer goods were down 0.2 percent. Ferrous metals sank 11.2 percent and ferrous metals were down 5.3 percent on the year.

The PPI measures the change in the price of goods purchased and sold by producers. PPI for manufactured goods consists of a producer price index and purchaser price index. The industrial producer price index reflects the trend and level of prices change when the products are sold for the first time. The industrial purchaser price index reflects the trend and level of prices change for the products purchased by the industrial enterprises as intermediate inputs.

It is a leading indicator of consumer inflation - when producers pay and charge more for goods the higher costs are usually passed on to the consumer.

The PPI measures the industrial products price changes for the domestic market. Unlike most other countries, China only produces a comparison with the same month in the previous year but not with the previous month. The PPI covers all manufacturing activities. The prices include excise taxes but exclude VAT. The industry breakdown for the PPI follows China's Industrial Classification of the National Economy. The data include a 38 industry breakdown and are not adjusted for seasonality. They are available by the 20th of the month following the reference month and are published in the daily NBS paper "China Information".

The statistical survey of industrial producer prices covers prices for over 11,000 products from 1702 subclasses, 191 groups; and the statistical surveys of industrial purchaser prices cover prices for over 6,000 industrial products from over 900 subclasses. Industrial producer prices are collected from combined surveys of key businesses and typical businesses. Starting from 2011, the key businesses are those with their turnover from primary activities over 20 million yuan, and the typical businesses are those with less than 20 million yuan. The surveys cover about 60,000 industrial enterprises in over 400 cities across the country.