China’s factory-gate prices fall at faster pace, consumer prices rise more slowly

FILE PHOTO: Staff sort fruits at a Walmart in Beijing, China, September 23, 2019. REUTERS/Tingshu Wang

BEIJING (Reuters) – China’s annual factory gate prices fell at a faster-than-expected pace in September and consumer prices rose at their slowest pace in 19 months, underscoring the challenges China faces as it tries to recover from the COVID-19 pandemic.

The producer price index (PPI) fell 2.1% from a year earlier, marking the eighth straight month of declines, the National Bureau of Statistics NBS) said in a statement. That compared with a 2.0% drop in August and expectations for a 1.8% decline in a Reuters poll.

On a monthly basis, PPI rose 0.1%, after increasing by 0.3% in August.

China’s economy has seen a steady recovery after a dismal first quarter when most of the country was shut down due to the COVID-19 pandemic. Factory activity expanded at a faster-than-expected rate in September.

But a cooling in producer prices, seen as a gauge of industrial demand that gives momentum to investment and profits in the Chinese economy, may rekindle worries about deflation and prompt authorities to launch more aggressive stimulus, analysts said.

NBS data also showed China consumer price index rose by 1.7% in September from a year earlier, its slowest increase since February 2019. Economists in a Reuters poll had expected the consumer price index to increase 1.8% after a 2.4% rise in August.

Core inflation that strips out volatile food and energy prices remained weak at 0.5% in September from a year earlier, the same annual pace as in August.

Premier Li Keqiang warned on Monday that China needs to make arduous efforts to achieve its full-year economic goals. China’s gross domestic product grew 3.2% year-on-year in the second quarter.

Reporting by Stella Qiu and Ryan Woo; Editing by Ana Nicolaci da Costa