CN: Producer Price Index

Thu Dec 08 19:30:00 CST 2016

Consensus Actual Previous
Y/Y % Change 2.3% 3.3% 1.2%
M/M % Change 1.5% 0.7%

China's producer price index rose 3.3 percent year-on-year in November, up sharply from an increase of 1.2 percent in October, and also well above the consensus forecast of 2.3 percent. This is the strongest year-on-year increase in the index since October 2011. The year-on-year change in the PPI has been trending higher since the end of 2015 and has now been above zero for three months after almost five years in negative territory.

On the month, the PPI was up 1.5 percent in November, the fifth consecutive monthly increase.

The large increase in PPI inflation in November was driven by stronger price pressures in all major categories. Prices for production materials, in particular, have risen sharply in recent months after a long period of year-on-year declines, with the year-on-year increase up from 1.6 percent in October to 4.3 percent in November. Fuel and power inflation also rose strongly, up from 1.8 percent to 6.0 percent, with stronger price gains also recorded for metals and other raw materials. Consumer good prices rose in year-on-year terms for the second consecutive month after a long period of decline and stagnation, up from 0.1 percent to 0.4 percent.

Today's data shows that the upward trend in year-on-year changes in the PPI has now decisively broken into positive territory. Further weakness in China's currency and further gains in global commodity prices among the main factors adding to these cost pressures and look likely to keep doing so in the near-term. These gains in producer prices also look likely to put further upward pressure on consumer prices, which also posted an increase in headline inflation in November.

The Producer Price Index (PPI) measures the change in the price of goods purchased and sold by producers. 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.