Driven by factors including rising energy prices, both the year-on-year gains of September CPI and PPI widened. The PPI growth hit a nearly four-year high, and prices as a whole showed a moderate recovery trend. Analysts expect this upward momentum to persist in the fourth quarter.

Data released by the National Bureau of Statistics (NBS) on October 14 shows that the CPI rose 0.9% year-on-year in September, with its growth rate expanding by 0.1 percentage point from the previous month. The core CPI, excluding food and energy prices, increased by 1.0% year-on-year, unchanged from August.

Feng Lin, Executive Director of the Research & Development Department at Golden Credit Rating International, stated that renewed hikes in international crude oil prices, which pushed up domestic gasoline prices, were the primary driver behind the widened year-on-year CPI gain in September. Separately, surging chip prices fuelled by the global AI investment boom lifted prices of electronic products, which also pushed up the overall price level.

According to NBS statistics, gasoline prices climbed 16.6% in September, a 7.3-percentage-point expansion, contributing approximately 0.47 percentage points to the year-on-year CPI rise. This lifted the growth of energy prices to 7.3% in September from 4.1% in the prior month. Over the same period, prices of data storage devices, tablet computers, computers and mobile phones went up by 46.7%, 23.6%, 21.8% and 14.9% respectively, all posting accelerated growth. Together they added roughly 0.23 percentage points to the year-on-year CPI increase.

Nevertheless, the rise in food prices fell below seasonal levels. Pork and fresh vegetable prices dropped 10.0% and 8.1% year-on-year respectively in September, jointly dragging down the CPI by around 0.33 percentage points on a year-on-year basis.

In line with the CPI recovery, PPI growth also continued to accelerate. Data indicates that the September PPI increased by 5.0% year-on-year, widening by 1.2 percentage points month-on-month; it rose 1.2% month-on-month, 0.8 percentage points faster than August.

Dong Lijuan, Chief Statistician of the Urban Statistics Department at NBS, analysed the key features of month-on-month PPI movements in September: higher international crude oil and non-ferrous metal prices lifted prices of related domestic industries; shifting supply-demand balances in some energy and raw material sectors drove price increases; faster development in artificial intelligence, computing-power and electricity coordination and other fields boosted demand and prices in selected industries.

Zhao Wei, Chief Economist at Shenwan Hongyuan Securities, commented that the near four-year high in September’s year-on-year PPI was mainly attributable to widening gains in oil, freight and coal prices, alongside ongoing supply clearance in midstream and downstream sectors. As commodity prices keep edging higher, the October PPI may climb further to roughly 5.5%.

In year-on-year terms, eight industries recorded accelerated price growth in September compared with August: coal mining and washing, oil & gas extraction, petroleum, coal and other fuel processing, chemical raw materials and chemical products manufacturing, non-ferrous metal ore mining, non-ferrous metal smelting and rolling processing, electrical machinery and equipment manufacturing, and computer, communications and other electronic equipment manufacturing. Combined, these sectors contributed about 5.42 percentage points to the year-on-year PPI increase, 1.12 percentage points more than the prior month.

Zhang Di, Chief Macro Analyst at China Galaxy Securities, holds the view that CPI will most likely maintain mild fluctuations at a low level in Q4, while PPI may remain strong amid disruptions from crude oil and geopolitics. The overall moderate price rebound will not constrain pro-growth policies.

Wang Guanhua, Spokesperson of the National Bureau of Statistics, remarked at a press conference of the State Council Information Office (SCIO) that looking ahead, complex and volatile global geopolitics create uncertainty over international commodity prices, and external imported inflationary pressures require continued monitoring. China, however, boasts a complete industrial system, resilient industrial and supply chains, robust basic energy security, diversified energy import channels and ample reserves of key materials, enabling effective responses to swings in global markets. Meanwhile, ongoing domestic industrial restructuring, the fostering and expansion of new quality productive forces, and deepened comprehensive regulation of cut-throat competition will continue to underpin industrial product prices.

Source: Shanghai Securities News