Producer inflation in China is at a 4.5-year high, consumer inflation is falling

China’s producer price index rose 5.7% year over year in October, the fastest pace since June 2022, while consumer inflation slowed to 0.7% from 0.9%, highlighting a widening gap between upstream costs and weak domestic demand. Higher energy prices drove factory-gate costs, but subdued household spending limited pass-through to consumer prices. The divergence matters because it signals persistent margin pressure on manufacturers and soft consumption in the world’s second-largest economy. Investors will watch whether energy-driven cost increases ease and whether demand strengthens enough to support broader price growth.