CN: Producer Price Index

Thu Feb 08 19:30:00 CST 2018

Consensus Actual Previous
Y/Y % Change 4.3% 4.3% 4.9%
M/M % Change 0.3% 0.8%

China's headline producer price index increased by 4.3 percent on the year in January, slowing from an increase of 4.9 percent in December and in line with the consensus forecast. This is the third consecutive fall in producer price inflation and the lowest level since late 2016. The index rose 0.3 percent on the month after an increase of 0.8 percent previously

The decline in headline PPI inflation in January was broad based, with a weaker year-on-year increase in all but one of the major categories. Prices for production materials rose 5.7 percent on the year in January, down from 6.4 percent in December, while the year-on-year increase in prices for consumer goods moderated from 0.5 percent to 0.3 percent. Fuel and power costs rose 6.2 percent on the year in January, also slowing from 7.1 percent in December. Price gains were also weaker for ferrous metals but slightly stronger for non-ferrous metals.

The fall in headline PPI inflation in January is broadly in line with PMI survey results. The Caixin PMI surveys for the manufacturing sector and the services sector showed a weaker increase4 in input cost growth at the composite level, with stronger growth in service costs offset by slower growth in manufacturing 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.