CN: Producer Price Index

Wed Nov 08 19:30:00 CST 2017

Consensus Actual Previous
Y/Y % Change 6.6% 6.9% 6.9%
M/M % Change 0.7% 1.0%

China's headline producer price index increased by 6.9 percent on the year in October, unchanged from September but above the consensus forecast of 6.6 percent. The index rose 0.7 percent on the month in October after an increase of 1.0 percent in September.

Steady headline PPI inflation in October reflects relatively limited moves in most of the major components. Prices for production materials rose 9.0 percent on the year in October, down slightly from 9.1 percent in September, while the year-on-year increase in prices for consumer goods increased at a slightly faster pace, up 0.8 percent on the year in October after an increase of 0.7 percent in September. Fuel and power costs rose 10.6 percent on the year in October, slowing from 11.9 percent in September. Price gains were somewhat stronger and weaker respectively for non-ferrous and ferrous metals.

In year-to-date terms, the PPI has advanced 6.5 percent on the year to October, unchanged from the year-to-date increase in September, bit stronger than the decline of 2.5 percent recorded in the equivalent period last year.

Stability in headline PPI inflation in October is broadly in line with PMI survey results. The Caixin PMI survey for the manufacturing sector showed input costs rose in October at a slightly slower pace in October than in September, when they had risen at the fastest pace so far this year, while the equivalent survey for the services sector also showed a moderate increase in input costs.

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.