In a continued display of economic resistance, China's Producer Price Index (PPI) has recorded a significant decline of 2.8% year-on-year in September, as reported by the National Bureau of Statistics (NBS) recently. This follows a trend observed over the past nine months, where the average PPI decreased by 2% compared to the same period last year.
Additionally, September's PPI saw a month-to-month decline of 0.6% from August. The PPI serves as a critical economic indicator, reflecting prices 'at the factory gate,' which pertains to the wholesale price of goods and services before they reach retailers or consumers. It is essential to distinguish the PPI from the Consumer Price Index (CPI), which represents the prices faced by everyday shoppers at retail outlets.
The PPI is often seen as an early indicator of future consumer price trends, as it captures the costs that industries face, which can influence retail pricing strategies. China's persistently low PPI figures signal a concerning trend of economic sluggishness, exacerbated by a struggling property market that fails to stimulate demand for basic commodities.
The People Daily Online, a state-owned news outlet, notes insights from NBS statistician Dong Lijuan, who highlights that the fluctuations in the monthly PPI can be linked to international commodity price variations coupled with insufficient effective domestic demand. In specific sectors, the steel industry has been particularly hard-hit, with producer prices plummeting by 11.1% year-on-year in September.
Furthermore, when considering industrial producers, the prices of purchasing materials also fell, dipping by 2.2% year-on-year and 0.8% month-to-month from August. In response to these troubling economic indicators, Beijing's fiscal and monetary authorities have initiated a series of stimulus measures aimed at revitalizing domestic demand.
These measures include issuing bonds for public spending and instituting lower interest rates, which are hoped to encourage economic activity and counteract the ongoing downturn..