China’s factory-gate prices depreciate for first time in nearly 2 years under zero-Covid policy

China’s consumer price index (CPI) rose by 2.1 per cent in October from a year earlier, down from a rise of 2.8 per cent in September

Producer price index (PPI), which reflects the prices that factories charge wholesalers for products, fell by 1.3 per cent in October, down from a rise of 0.9 per cent in September

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Producer price index (PPI), which reflects the prices that factories charge wholesalers for products, fell by 1.3 per cent in October, down from a rise of 0.9 per cent in September. Photo: AP

Published: 9:41am, 9 Nov 2022Updated: 4:13pm, 9 Nov 2022

China’s producer prices fell into deflation for the first time in nearly two years last month, mirroring a sluggish economic environment, with analysts warning of continued downward pressure if Beijing sticks to its zero-Covid policy.

The producer price index (PPI), which reflects the prices that factories charge wholesalers for products, missed expectations and fell by 1.3 per cent in October, year on year, down from 0.9 per cent growth in September, the National Bureau of Statistics (NBS) said on Wednesday.

The rate has been falling every month since hitting 13.5 in October 2021, which was the fastest pace in 26 years, although China’s PPI last turned negative in December 2020 when it dropped to minus 0.4 per cent.

“In China, the economy depends very much on policy, and if policy follows the current track, I don’t think there will be any significant change in the economy, ” said Larry Hu, chief China economist at Macquarie Capital.

The PPI decline highlights weak domestic demand under Beijing’s strict coronavirus policy, Hu added, as well as falling commodity prices amid the overall global slowdown.

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