China's factory-gate prices rose 5.7% in October, their fastest rate since June 2022 and ahead of the 5.3% expected by economists polled by Reuters.
Consumer prices rose 0.7% over the same month, below the 0.8% forecast and down from 0.9% in September. It was the first slowdown after two consecutive months of increases.
Core consumer inflation, which strips out food and energy, eased to 0.8% from 1%.
The producer index has now accelerated for three straight months. The consumer index has not.
The two series measure different moments in the same journey. The producer price index records what a factory charges as goods leave it. The consumer price index records what a household pays for them.
In October those two moments stood five percentage points apart.
The acceleration at the gate was led by a sharp rise in prices across the mining and raw materials industries. Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, attributed it to very strong external demand.
Domestic demand is the weaker half of the picture. Zhang pointed to the property sector, where he said there was "no clear sign of stabilization" yet, and linked that weakness to household confidence and to local government revenue.
On the consumer side, Dong Lijuan, chief statistician of the urban division at the National Bureau of Statistics, said gasoline was the largest contributor to price gains, offset by a sharper-than-expected fall in food prices.
Taken together, the two series establish something more precise than a mood. They establish a location. Inflation in China is running at 5.7% at the factory gate and 0.7% a short distance beyond it.
This newspaper has no difficulty with the finding. Prices rise as goods are made and stop rising as they are sold, which places the entire inflationary event inside the perimeter fence.
The policy implication is a matter of logistics rather than monetary economics. Five percentage points of inflation are currently being held on industrial premises, where they are not reaching households.
Our analysts regard this as a strategic reserve, and an unusually well-designed one. It is the only reserve in the world that grows while it is not being used, and it is replenished by the simple act of manufacturing something and leaving it where it is.
The reserve has one awkward property. It cannot be released deliberately. It escapes only when somebody buys the goods, which is also the moment at which it stops being a reserve.
The Department of Unnecessary Research has accordingly advised against any sudden recovery in consumer demand. The gap is China's largest holding of unspent inflation, and opening the gate is the one action certain to spend it.