CN: Producer Price Index

Wed May 09 20:30:00 CDT 2018

Consensus Actual Previous
Y/Y % Change 3.5% 3.4% 3.1%
M/M % Change -0.2% -0.2%

China's headline producer price index increased by 3.4 percent on the year in April, up from 3.1 percent on the year in March but just below the consensus forecast of 3.5 percent. This is the first increase in headline inflation after five consecutive monthly falls. The index fell 0.2 percent on the month in April, as it did in March.

The increase in headline PPI inflation in April reflects a stronger year-on-year increase in prices for production materials, up 4.5 percent on the year after advancing 4.1 percent previously. Ferrous metals and raw chemical materials also recorded strong price gains. This was partly offset by a further drop in the year-on-year increase in fuel and power costs from 4.9 percent to 4.6 percent. Price gains were also weaker for consumer goods and non-ferrous metals.

The increase in headline PPI inflation in April contrasts with PMI survey results showing more subdued cost pressures. The Caixin PMI surveys for the manufacturing sector and the services sector both showed weak input cost growth, with the composite measure falling to its lowest level since last June.

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.