China's August Inflation Quickens as Energy Costs Bite
China's factory-gate and consumer inflation accelerated in August, propelled by higher energy costs, even as underlying domestic demand stayed subdued.
China's factory-gate inflation accelerated in August, and consumer price growth also picked up, driven largely by elevated energy costs linked to supply risks from the Middle East conflict. The data underscores the challenge facing policymakers as an export-led rebound cushions entrenched domestic weakness.
The producer price index (PPI) rose 3.8% from a year earlier, according to data from the National Bureau of Statistics (NBS). This marks an acceleration from the 3.5% increase recorded in July and came in slightly above market expectations. Meanwhile, the consumer price index (CPI) climbed 0.8% year-on-year, up from 0.5% in July, matching forecasts.
An NBS statistician attributed the rise to higher international prices for crude oil and non-ferrous metals, which pushed up costs across related industries. Faster energy price inflation alone contributed roughly 0.28 percentage points to the annual CPI increase.
Beyond energy, the data was also influenced by weather-related disruptions. Typhoons and heavy rainfall across large parts of the country last month disrupted transport, production, and construction activity.
Core inflation, which strips out volatile food and energy prices, rose 1% on an annual basis, a slight uptick from the 0.9% gain seen in July. On a monthly basis, the CPI increased 0.4%, a notable rebound from a 0.1% decline in the previous month.
Oil prices have been supported by heightened geopolitical tensions, while an AI-driven memory chip shortage has added to costs in some sectors. However, persistent weakness in domestic demand continues to keep overall inflationary pressures in check, with piecemeal consumption support yet to spark a broader recovery.
In response, policymakers have stepped up efforts to bolster confidence, including expanding loan-interest subsidies for consumers and small private firms. The finance ministry has also signalled readiness for additional fiscal support if conditions warrant. To help stabilise the property market, a longstanding drag on household spending, authorities have moved to curb housing presales and extended the maximum term for personal mortgage loans to 40 years from 30.