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China inflation diverges as producer costs surge, consumer prices stay cool
August data showed CPI at 0.8% y/y and core CPI at 1.0% y/y, while PPI climbed 3.8% y/y, widening the upstream cost shock.
China’s inflation picture diverged sharply in August, with consumer prices staying contained even as industrial cost pressures strengthened. CPI rose 0.8% year over year and 0.4% month over month, while core CPI excluding food and energy increased 1.0% year over year, according to Action Forex.
Food prices remained a drag, down 1.4% year over year, including pork prices falling 11.8%. Energy pressure appeared at the consumer level as transport fuel prices jumped 8.3% year over year and 6.6% month over month.
The stronger inflation impulse was upstream in industrial pricing. Producer prices, measured by PPI, rose 3.8% year over year and 0.4% month over month, with industrial purchasing prices up 5.8% year over year.
Action Forex said the uneven “inflation pipeline” suggests commodity and energy inputs, which were particularly strong, are not yet translating into broad household inflation, and the gap between input-price inflation and factory-gate inflation points to a potential squeeze on manufacturers that cannot pass costs downstream.