China's Inflation Risks Build as Producers Pass on Costs
Comment of the Day

November 10 2021

Commentary by Eoin Treacy

China's Inflation Risks Build as Producers Pass on Costs

This article from Bloomberg may be of interest to subscribers. Here is a section:

The producer price index climbed 13.5% from a year earlier, the fastest pace in 26 years and above economists’ median forecast for a 12.3% gain, data from the National Bureau of Statistics showed Wednesday. The consumer price index rose 1.5%, the highest since September 2020 and exceeding the projected 1.4% gain.

Producer prices in China have been rising rapidly in the past few months, first due to the global commodity price rally and then output curbs caused by a power crunch. Consumer inflation is also starting to pick up as weather-related supply problems push up food prices and manufacturers pass on higher costs to retailers. 

The data “implies broad-based inflation pressure on both the production side and the consumer side,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd. “Inflationary pressure and the more hawkish stance of monetary policy in other major economies will likely limit China’s room to maneuver for monetary easing.”

Eoin Treacy's view

China exported deflation for much of the last twenty years, with a steady flow of cheaply manufactured goods flooding the global market. That boosted consumption as well as created the impression prices would never again rise in an unexpected matter.

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