One of China’s inflation indicators drops for the first time since 2020

China’s producer price index fell year-on-year in October 2022 for the first time since December 2020. Pictured is a furnace at a steel mill in August 2022 in Jiangxi province.

Zhang Yu | Visual Group China | Getty Images

BEIJING — China’s producer price index fell in October for the first time since December 2020, led by lower iron and steel prices, official data showed Wednesday.

The producer price index, which tracks the price of raw materials and other input costs, fell 1.3% in October from a year ago. That slightly beat expectations for a 1.5% drop, according to a Reuters poll.

The decline comes from double-digit gains last year as commodity prices soared.

In October, measures for ferrous metals, which includes iron and steel, and the coal industry recorded the most pronounced declines within the producer price index.

Changes in the producer price index in China tend to precede similar changes in the United States by about one or two months, said Francoise Huang, senior economist at Allianz Trade, in October.

While inflation surged in the United States and Europe, the consumer price index in China remained subdued due to sluggish domestic demand. Tight Covid controls caused China’s GDP to decline at a 3% pace for the year, starting in the third quarter.

China’s consumer price index rose 2.1% in October from a year ago, below Reuters expectations for a 2.4% increase.

Pork, a staple food in China, saw its prices jump 51.8%, while fruit rose 12.6%. However, fresh vegetable prices fell 8.1%, reversing the previous month’s increase.

Excluding food and energy, the so-called core CPI rose 0.6% in October, unchanged from the previous month. That marked the slowest pace since March 2021, according to Wind Information.

China released trade data this week that showed an unexpected drop in exports last month, driven by lower sales of goods to the United States and the EU. Chinese imports also fell, reflecting weak domestic demand.

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