CN: Producer Price Index

Fri Jun 08 20:30:00 CDT 2018

Consensus Actual Previous
Y/Y % Change 3.8% 4.1% 3.4%
M/M % Change 0.4% -0.2%

China's headline producer price index increased by 4.1 percent on the year in May, up from 3.4 percent on the year in April and above the consensus forecast of 3.8 percent. The index rose 0.4 percent on the month after falling 0.2 percent previously.

The increase in headline PPI inflation in May reflects a stronger year-on-year increase in prices for most major categories. Prices of production materials advanced 5.4 percent on the year after increasing 4.4 percent previously, while prices for raw materials rose 7.4 percent after increasing 5.7 percent previously. After price gains eased in the two previous months, fuel and power prices grew 5.5 percent on the year in May, up from 4.6 percent in April. Consumer good prices rose 0.3 percent on the year, up from 0.1 percent in April.

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.