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Wednesday, October 20, 2021

China: Key price measure rises at fastest rate ever

IDBS ART GALLERY

China’s “factory gate” prices – a measure of what manufacturers charge wholesalers for products – grew at the fastest rate on record last month.

The rising cost of goods comes as Chinese businesses face power outages and rising commodity prices.

Because China is the world’s largest exporter, price increases could have an impact on other countries.

Firms around the world are dealing with supply issues as economies recover from the pandemic.

Major power shortages in China have halted production at factories including suppliers to global brands such as Apple, due to an increase in demand from industry, high energy prices, and the country’s shift to cleaner energy sources.

According to official data, the producer price index (PPI) rose 10.7 percent year on year in September, the fastest rate of growth since records began in 1995.

However, there is little evidence that these higher costs are being passed on to Chinese consumers at the moment.

China’s consumer price index, also released on Thursday, increased by 0.7 percent year on year in September, edging up from the previous month but falling short of most economists’ expectations.

However, as manufacturers’ profits are squeezed and businesses face higher electricity prices, this may change in the coming months.

Due to fluctuating prices, consumer demand for items such as household goods, clothing, and food may have weakened as well.

The cost of goods in China is being closely monitored for signs that prices may rise in other parts of the world, potentially driving up inflation in countries that import its products.

Inflation in countries such as the United Kingdom and the United States has risen in recent months as their economies have opened up following the pandemic.

As a result, there are growing expectations that central banks will be forced to raise borrowing costs and reverse emergency measures aimed at mitigating the impact of lockdowns.

Some countries, such as New Zealand, South Korea, and Norway, have raised interest rates in recent weeks in an attempt to cool their economies and ease inflationary pressures.

Many industries in the country have been affected by the power outages, particularly those that require a large amount of energy, such as cement production, steel and aluminium smelting.

As utility companies struggle to produce enough electricity to meet demand, the price of coal used in many of China’s power plants has reached a series of record highs in recent days.

Beijing has taken steps to alleviate the power crisis, including urging coal miners to increase output and regulating the amount of electricity consumed by large factories.

SourceBBC
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