December 7, 2021

Image credit: Reuters

China’s key pricing indicator is rising at its fastest rate ever

Last month, China’s “factory gate” prices climbed at the quickest rate on record, a gauge of what manufacturers charge wholesalers for products.

The rising cost of goods comes as Chinese businesses struggle with power outages and rising commodity prices. Because China is the world’s largest exporter, price increases there could have an impact on other countries.

As economies recover from the pandemic, businesses around the world are dealing with supply challenges. Major power shortages in China have halted production at factories that supply worldwide brands like Apple, due to an increase in demand from industry, high energy prices, and the country’s transition to cleaner energy sources.

The producer pricing index (PPI) jumped 10.7% from a year ago in September, the fastest rate of inflation since records began in 1995, according to official figures. However, there is little evidence that these additional prices are being passed on to Chinese consumers at the moment.

China’s consumer price index climbed 0.7 percent year over year in September, edging higher from the previous month but falling short of most experts’ expectations. However, if manufacturers’ revenues are squeezed and businesses are confronted with increasing electricity rates, this could alter in the coming months.

Due to fluctuating costs, customer demand for commodities such as household goods, clothing, and food may have declined as well. The cost of goods in China is being closely monitored for indicators that prices in other parts of the world are rising, which might drive up inflation in nations that import Chinese goods.

Inflation has risen in recent months in countries such as the United Kingdom and the United States as their economies recover from the pandemic. Many industries in the country have been affected by the power outages, particularly those that utilise a lot of energy, such as cement manufacture, steel production, and aluminium smelting.

Beijing has taken steps to alleviate the power shortage, including encouraging coal miners to increase output and regulating how much electricity huge enterprises consume.