China Factory Prices Surge Again as Pollution Drive Curbs Output

Updated on
Bloomberg’s Malcolm Scott reports on China’s PPI data.

China’s factory prices kept surging last month as authorities curb production in smokestack industries to combat pollution.

Key Points

  • The producer price index rose 6.9 percent in October from a year earlier, versus a projected 6.6 percent rise in a Bloomberg survey and matching September’s pace
  • The consumer price index climbed 1.9 percent, the statistics bureau said Thursday, exceeding the median forecast of 1.8 percent

Big Picture

Policy makers signaled a shift away from the growth-at-all-costs model at their twice-a-decade Party Congress last month amid greater focus on curbing pollution and taming financial risk. China has stepped up restrictions on steel mills and aluminum factories before winter, when pollution levels are often at their worst in the northern part of the country.

Economist Takeaways

"Today’s inflation data basically dismiss any hope for monetary policy easing," said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group in Hong Kong. "The authorities will continue to maintain a tightening bias. Onshore rates are seeing upward pressure."

“The data show production cuts driven by environmental cleanups exceeded expectations," said Zhao Hongyan, a China economist at Huatai Financial Holdings Ltd. in Hong Kong. "China’s economy is softening this quarter, but there’s no danger of a sharp slowdown."

"Supply-cutting exercises are at work," said Iris Pang, a China economist at ING Groep NV in Hong Kong. "Demand is chasing after a smaller supply."

Bloomberg Economics

"Factory price inflation remained elevated at a high level -- a positive for corporate profits and debt repayment," Fielding Chen, an economist at Bloomberg Economics in Hong Kong, wrote in a note. "Industrial-sector reflation has been driven by robust demand on government stimulus, buoyant commodity prices, and measures to cut excess capacity and reduce supply."

The Details

  • Food prices fell 0.4 percent on year versus a 1.4 percent drop the prior month
  • Sectors including coal mining and iron and steel both saw price gains decelerate to the slowest paces since late last year
  • Price gains accelerated in sectors including paper, gas and crude oil

— With assistance by Xiaoqing Pi, and Ailing Tan

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