China announces sale of part of its oil reserves 1:01
(CNN) -
China's inflation problem is getting worse.
The cost of goods leaving China's factories broke another record last month, and there are increasing signs that consumers are beginning to feel the impact.
Record inflation at China's factories poses another threat to global supply chains
The producer price index rose 13.5% in October from a year ago, climbing from 10.7% in September, the National Bureau of Statistics of China reported on Wednesday.
Last month's increase was the fastest since the government began releasing this data in the mid-1990s, according to Eikon Refinitiv.
Workers assemble cars at a Dongfeng Honda factory in Wuhan, China, on April 8, in this file photo.
(Han Guan / AP)
And now it seems that higher costs are seeping down.
China's consumer price index rose 1.5% in October from a year ago, double the previous month and the fastest rate of increase since September 2020.
Concern about the pass-through of prices to the consumer
"We are concerned about the pass-through from producer prices to consumer prices," said Zhiwei Zhang, chief economist at Hong Kong-based Pinpoint Asset Management.
"The companies had been able to use their input inventories as a buffer to avoid passing the higher costs on to their customers, but their inventories have been depleted."
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October marks the first time that consumer inflation has rebounded in five months.
The rate had gradually decreased since May.
But rising electricity bills and disruptions in the food supply chain have started to fuel prices.
China increases its exports.
It will be enough?
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Last week, China's Ministry of Commerce issued an advisory ordering local governments to encourage families to stock up on food and other essentials as bad weather, power shortages and restrictions covid-19 threatened to disrupt supplies.
The sudden warning sparked panic buying among the public and frenzied speculation on the internet.
Authorities attributed the rise in consumer price inflation to rising costs for vegetables and fuel.
The impact of increased fuel
Vegetable prices soared 16% in October, mainly due to heavy rains and rising transportation costs, according to a statement by Dong Lijuan, a senior statistician at NBS.
Extreme weather has hurt crops, and authorities have acknowledged that the cost of transport between regions could rise due to strict measures aimed at containing outbreaks of Covid-19.
Gasoline and diesel prices rose more than 30%, according to Dong.
Problems in China's real estate sector could impact the US 0:47
The current power shortage was also the main factor contributing to rising producer price inflation, as the cost of mining and processing coal has risen.
The world's second largest economy is already growing at the slowest pace in a year, as energy problems, maritime transport disruptions and the deepening real estate crisis take their toll.
Rising inflation in the country is also causing concern around the world.
Rising producer inflation is "fueling upward pressure on global inflation," taking into account China's role as the world's factory and its importance in the global supply chain, according to Ken Cheung, chief currency strategist. Asia Bank of Mizuho Bank.
Producer inflation may also remain high "for a while, probably into the winter," said Jing Liu, HSBC's senior economist for Greater China.
He added that energy prices may also continue to rise, and consumer price inflation is expected to continue to rebound.
Inflation
