China's factory-gate inflation at fastest in nearly 4-1/2 years in October, while CPI rise moderates

China's producer inflation surged to its fastest pace in nearly four and a half years in October, driven by higher global oil prices that increased manufacturing costs. Despite this, consumer inflation moderated due to weak domestic demand, according to data released on Monday. The war in the Middle East has kept energy prices high, impacting various energy-intensive sectors, a key factor in producer-price inflation.

However, these upstream price pressures have not yet fully translated into consumer prices, as weak household demand curbs spending in China, the world's second-largest economy. The producer price index increased by 5.7% year-on-year, surpassing both the 5.0% rise in the previous month and a Reuters poll forecast of a 5.3% increase.

It marked the highest annual rise since June 2022, when the PPI climbed by 6.1%. The consumer price index rose by 0.7% year-on-year, slightly below economists' expectations of a 0.8% increase. Analysts anticipate a return to deflation in producer prices next year, while consumer inflation is expected to average 0.4% in 2027.