China factory-gate inflation heats up as commodity costs rise, CPI lags

Published Wed, Oct 14, 2026 · 02:45 PM

[BEIJING] China’s producer prices rose at their fastest pace in more than four years in September while consumer inflation edged up, as pricier oil and commodities lifted factory-gate costs even as weak domestic demand kept broader price pressures contained.

The data suggests prices are revving up for manufacturers, but weak consumer demand continues to restrain inflation, reinforcing concerns that China still faces an uneven recovery driven more by exports than spending.

Household spending remains subdued and private-sector confidence fragile despite a series of stimulus measures, underscoring persistent weakness in domestic demand and broader economic imbalances.

The producer price index rose 5 per cent from a year earlier, National Bureau of Statistics data showed on Wednesday, up from 3.8 per cent in August and beating the estimated 4.5 per cent rise in a Reuters poll. That marks the fastest pace of factory-gate inflation since June 2022.

“Much of the upward pressure still came from commodity supply disruptions caused by the Middle East conflict, with prices rising particularly sharply in fuel processing, chemicals and non-ferrous metals,” said Nguyen Hoang Nam, China economist at Capital Economics, who expects prices to fall back next year.

Higher oil and commodity prices, driven by transport disruptions, adverse weather and geopolitical tensions, have increased cost pressures for manufacturers, though sluggish demand has limited the pass-through to consumers.

The consumer price index (CPI) gained 0.9 per cent year-on-year, compared with a 0.8 per cent increase in August, and came in below economists’ forecast for a 1 per cent rise.

Petrol prices soared 16.6 per cent from a year earlier and contributed about 0.47 percentage points to headline CPI growth, the statistics agency said. Underlying consumer price pressures, however, remained muted, suggesting households are still cautious about spending.

Core inflation, which excludes volatile food and energy prices, was up 1 per cent on the year, unchanged from August.

Zhou Hao, chief economist at Guotai Junan International, said a key question is whether stronger industrial momentum can gradually feed into employment, income growth and consumer confidence.

“If that transmission mechanism improves, the current divergence between producer and consumer prices could narrow from the demand side, creating a more balanced and durable recovery in 2027.”

Markets were little changed, with China’s blue-chip index down 0.1 per cent and the Shanghai Composite up 0.1 per cent.

Beijing has stepped up support for the economy, approving an additional 550 billion yuan (US$82.15 billion) in unused local government bond quota for infrastructure and other spending, adding to measures such as mortgage subsidies.

Month-on-month, CPI ticked up 0.2 per cent, versus expectations for a 0.3 per cent gain and a 0.4 per cent increase in August. REUTERS