China’s producer price index climbed at its fastest pace in more than four years, rising 5% in September as rising fuel prices pushed up costs for businesses.
This increase is higher than the 4.5% expected by economists polled by Reuters, and up sharply from the 3.8% observed the previous month.
China’s National Bureau of Statistics said higher prices were also seen in the country’s coal sector, due to increased demand for coal for heating in winter, temporary supply tightness in major coal-producing regions and expectations of higher international coal prices.
Consumer prices rose 0.9%, slightly below expectations of 1%, but up from 0.8% the previous month.
The increase in the consumer inflation rate was driven by gasoline prices, which rose 16.6 percent and contributed about 0.47 percentage points to the year-on-year increase in the CPI, according to Dong Lijuan, chief statistician of the NBS Urban Division.
This was partially offset by a broader drop in food prices, which fell 1.7 percent and lowered the CPI by 0.29 percentage points, Dong added.
The CPI base rate, which excludes volatility in food and energy prices, rose 1%.
The lower-than-expected CPI reading indicates that domestic demand remains “lackluster,” according to Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, in a note after the data was released.
However, the rise in the PPI indicates that the economy is gradually moving away from deflationary pressures, although the recovery remains uneven, said Hao Zhou, chief economist at Guotai Junan International Holdings.
According to him, domestic demand is recovering more gradually than the industrial sector, although the fact that consumer inflation has remained in positive territory, as indicated in the deflationary environment of 2024 and 2025, “continues to fade”.
The higher inflation figures come as China’s economy grapples with its lowest growth rate in more than three years. GDP growth for the second quarter of the year exceeded expectations, at 4.3%.
While August economic data showed that retail sales grew more slowly than expected, industrial production exceeded expectations.
On September 28, a statement from the State Council signaled that increased policy support may be on the way for China’s economy, saying that “in response to emerging challenges in the operation of the economy, efforts should be made to intensify countercyclical adjustment of macroeconomic policies.”
Lynn Song, chief economist for Greater China at ING, wrote that “this marks a slight change in tone,” adding that more policy support measures will be deployed in order to achieve short- and long-term growth goals.
“These include the GDP growth target of 4.5 to 5.0 percent for 2026 and the long-standing goal of doubling GDP from 2020 to 2035.”
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