Producer prices in China finally start to rise

After 54 consecutive months of decline, producer prices in September rose 0.1 % y-o-y, bringing to an end an unprecedented producer price deflation episode that began in March 2012. The protracted period of falling producer prices reflected both the drop in global commodity prices and China’s overcapacity problems. The rise in prices has mostly been caused by the recovery in global commodity prices. Prices of liquid fuels, coal and metals all began to rise. Prices of almost all other products have generally held at roughly the same level as a year ago. An increase in producer prices creates upward pressure on China’s export prices and possibly global producer prices as well.

The rise in consumer prices accelerated from 1.3 % in August to 1.9 % last month. Food prices were up sharply. Core inflation (excludes food and energy prices) has remained stable and below 2 % for over three years.

Price trends in China

Source: Macrobond and BOFIT.