CN: Producer Price Index

Fri Sep 08 20:30:00 CDT 2017

Consensus Actual Previous
Y/Y % Change 5.7% 6.3% 5.5%
M/M % Change 0.9% 0.2%

China's headline producer price index increased by 6.3 percent on the year in August, well above the consensus forecast of 5.3 percent. This follows three consecutive months in which the index rose 5.5 percent on the year. The index rose 0.9 percent on the month after an increase of 0.2 percent in July.

In year-to-date terms, the PPI is up 6.4 percent on the year to August, compared with a decline of 3.2 percent in the equivalent period last year.

Although PPI inflation remains well below levels seen earlier in the year, the strong month-on-month increase in August suggests price pressures have strengthened recently. The Caixin Manufacturing PMI survey for August, released at the start of the month, also indicated somewhat stronger growth in input costs, with manufacturers' selling prices reported to have risen at the fastest pace so far this year.

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.