Economist at UOB Group Ho Woei Chen, CFA, comments on the release of the Producer Prices in the Chinese economy.
“China’s Producer Price Index (PPI) inflation surged to a record high of 10.7% y/y in September (Bloomberg est: 10.5%; Aug: 9.5%) while Consumer Price Index (CPI) rose at a more subdued pace of 0.7% y/y (Bloomberg est: 0.8%; Aug: 0.8%) due to a larger food price deflation.”
“We estimate the impact of the electricity price hike will bring the PPI close to 12% y/y in 4Q21. With the PPI averaging 6.7% y/y YTD and further upside price pressure, we are raising our full-year PPI forecast to 8.0% from 7.5% (2020: -1.8%).”
“CPI inflation averaged just 0.6% y/y YTD as a result of limited pass-through from higher PPI. Having said that, we expect CPI gains to pick up in 4Q21, due to a low base of comparison while pass-through from higher energy prices is also expected to increase. For now, we maintain our full-year 2021 CPI forecast at 0.8% (2020: 2.5%) with consumer price inflation expected to rise to 1.7% y/y in 4Q21.”