Soaring energy prices drive up producer and consumer inflation in China for August.

China’s Economic Overview – September 2023

1. Factory-Gate Inflation & Consumer Prices:

   • China’s factory-gate inflation increased in August, with the producer price index (PPI) rising by 3.8% year-on-year, up from 3.5% in July.
   • The consumer price index (CPI) also grew, registering a 0.8% increase, compared to 0.5% in July.

2. Driving Factors:

   • Elevated energy costs, influenced by geopolitical tensions linked to the Middle East conflict, contributed significantly to inflation.
   • Strong international crude oil and non-ferrous metal prices affected multiple sectors.

3. Challenges:

   • Despite some export-led growth, domestic demand remains sluggish, compounded by trade tensions and adverse weather conditions that have disrupted various activities.
   • Core inflation, excluding volatile items like food and energy, saw a rise of 1%.

4. Monthly Trends:

   • On a monthly basis, CPI rose 0.4%, exceeding forecasts for a 0.3% increase.

5. Policymaker Actions:

   • Authorities are enhancing consumer confidence through increased loan-interest subsidies and signaling potential fiscal support.
   • Measures to stabilize the struggling property market include changing housing presale regulations and extending mortgage terms.

6. Outlook:

   • The combination of domestic weaknesses and global pressures presents ongoing hurdles for China’s economic recovery.

(Reporting by Qiaoyi Li and Liz Lee; Editing by Shri Navaratnam)