BEIJING – China’s September factory gate inflation rose to a record on soaring commodity prices, but weak demand capped consumer inflation, forcing policymakers to walk a tight rope between supporting the economy and further stoking producer prices.

The producer price index (PPI) rose 10.7% from a year earlier in September, the National Bureau of Statistics (NBS) said on Thursday, the biggest rise since the bureau started compiling the data in 1996. Economists in a Reuters poll had expected a 10.5% rise, after a 9.5% increase in August.

Producer prices have risen due to output curbs caused by a power crunch at a home and a months-long global commodity price rally. But Chinese businesses have been reluctant to pass on the higher costs to local customers due to already soft orders.

Data on Thursday showed consumer inflation eased last month, weighed by weak demand for goods from clothing to household appliances, as well as a decline in volatile food prices.

Tang Jianwei, chief macroeconomics analyst at BOCOM, said China’s mixed inflation picture posed a dilemma for the country’s monetary authorities.

“On one side, the relatively weak domestic demand requires a certain degree of easing to support a recovery in demand and on the other side, record high PPI restricts the room of easing,” said Tang Jianwei, chief macroeconomics analyst at BOCOM.

Underpinning producer prices, global commodity prices surged in recent months driven by increased demand for coal and metals as economies around the world reopened after being shut due to the COVID-19 pandemic. Labour shortages and transportation bottlenecks have also lifted prices globally.

Adding to the price pressures in China, widespread power cuts in September disrupted output across the cement, steel，and aluminum industries, and even halted production at numerous factories including many supplying big global brands such as Apple. China’s power crunch has stemmed from a coal shortage amid efforts to meet decarbonisation goals and record prices of the fuel.

Prices rose in 36 out of 40 industrial sectors last month, up from 32 sectors in August, the data showed. Prices in mining and coal jumped 74.9%, up sharply from August’s 57.1% rise.

But the consumer price index rose 0.7% year-on-year in September, slowing from a 0.8% increase in August and below a forecast for a 0.9% rise in the Reuters poll.

“Bottlenecks in the supply side continue to exist and the demand was weak so producers cannot pass through the costs. This is a painful process the Chinese economy has to go through,” said Zhou Hao, senior EM economist at Commerzbank.

China’s economic growth is expected to slow to 5.2% year-on-year in the third quarter from 7.9% in April-June, a recent Reuters poll showed.

MEASURES

Rising price pressures come even as Beijing has taken a raft of measures to curb record-high coal prices and ease the country’s power crunch, including urging coal miners to boost output and manage electricity demand at industrial plants.

The government said last week that it will allow coal-fired power prices to fluctuate by up to 20% from base levels, a loosening of previous limits.

ANZ expect the move to boost the headline PPI by 2 percentage points in the near term, while the impact on CPI will be a mere 0.5 percentage point.

Tang said the chances of an interest rate cut or a reduction in banks’ reserve requirements this year were low, adding authorities would likely keep interbank liquidity reasonably ample through structural adjustments instead.

The People’s Bank of China has kept its benchmark rate for corporate and household loans unchanged for 17 months, while it last lowered the reserve requirements in mid-July.

Core inflation, which strips out volatile food and energy prices, reached 1.2% in September, unchanged from August.

However, in a sign that consumer inflation is not indefinitely immune to broader price pressures, Foshan Haitian, China’ largest manufacturer of soy sauce, said this week it plans to raise prices by as much as 7% from Oct. 25 due to rising costs for raw materials, transportation and energy. – Reuters

By Antoni Slodkowski

TOKYO, Oct 14 (Reuters) – Japan dissolved its parliament on Thursday, setting the stage for an election at the end of the month that will pit new Prime Minister Fumio Kishida against unpopular opposition in a battle over who can better fix the pandemic-battered economy.

Kishida enjoys reasonable public support 11 days into the job, polls show, boding well for his goal of maintaining a lower house majority for his Liberal Democratic Party (LDP) and its Komeito party coalition partner.

“I want to use the election to tell the people what we’re trying to do and what we’re aiming for,” Kishida told reporters gathered at his office.

Reflecting on the last 11 days, Kishida said: “I’ve had a very busy schedule but strangely, I’m not feeling tired — I’m feeling fulfilled.”

Voters will want to see a government with plans for decisive action to end the pandemic and rebuild the economy. A recent Sankei newspaper poll showed that about 48% say they want the Kishida administration to work on coronavirus most, followed by economic recovery and employment.

Kishida’s party is promoting his push for coronavirus measures including supplying oral antiviral medication this year, as well as his vision of realising a “new capitalism” that focuses on economic growth and redistribution of wealth.

The ruling party has also called for a sharp increase https://www.reuters.com/world/asia-pacific/with-an-eye-china-japans-ruling-party-makes-unprecedented-defence-spending-2021-10-13 in defence spending to acquire the capability to destroy ballistic missiles, amid China’s increasingly assertive posture over Taiwan.

The largest opposition party https://www.reuters.com/world/asia-pacific/main-parties-contesting-japans-lower-house-poll-2021-10-07, the Constitutional Democrats (CDPJ), led by Yukio Edano, has highlighted issues https://www.reuters.com/article/us-japan-politics/japans-largest-opposition-party-focuses-on-human-rights-in-party-platform-idUSKBN2H30MO?edition-redirect=in such as its support for same-sex marriage and different surnames for couples.

The LDP remains socially conservative https://www.reuters.com/world/asia-pacific/japan-shadow-shogun-abe-assured-clout-over-next-pm-kishida-2021-09-30 and, while progress has been made on LGBTQ rights in society, Kishida has said he was not in favour of same-sex marriage.

The biggest challenge for Constitutional Democrats is their low support ratings. A recent poll by the Asahi Shimbun daily found only 13% were planning to vote for them, far behind the LDP’s 47%; most other polls record support in the single digits.

Also, Kishida’s focus on redistribution and economic growth has blurred policy differences between the LDP and CDPJ.

Edano said his party, if it were to take power, would go straight to wealth distribution to kickstart growth.

“‘Wage hikes and distribution once growth is achieved.’ This is what (former prime minister Shinzo) Abe was saying. But there was no growth over the past eight, nine years and no wage hikes,” Edano told reporters. “If we don’t distribute wealth first, no growth is achieved. This is a rather clear difference (between the two parties).”

Canvassing in many districts is already underway but formally the campaign will kick off on Oct. 19, followed by the vote on Oct. 31. Kishida is expected to hold a news conference Thursday night. – Reuters

WASHINGTON – The U.S. government will ship 2.4 million doses of COVID–19 vaccine to Pakistan on Thursday, bringing the total number of doses sent to the South Asian country to about 18.3 million, more than any other country, a White House official said.

The latest shipments of the vaccine lots made by Pfizer and Germany’s BioNTech, are due to arrive on Saturday via the COVAX distribution program, said the official, who asked to remain unidentified.

Pakistan has administered at least 93.6 million doses so far, according to data compiled by Reuters. Assuming every person needs two doses, that would suffice to have vaccinated about 21.6% of the country’s population.

Previous U.S. shipments of Moderna and Pfizer-BioNTech vaccines have gone to Pakistan every month since June.

The shipment is part of an ongoing U.S. vaccine diplomacy effort that has sent vaccines to dozens of countries. – Reuters