China’s factory inflation hit 5.7% in October, the highest since June 2022, as oil costs outran demand. That beat the 5.3% forecast and arrives a day before US inflation data that could shape the Fed’s December decision.
Chinese consumer inflation cooled to 0.7%, though, so the pressure has not reached households. Traders already price roughly a 78% chance of a December Fed hike, and US stocks have tracked that pricing.
Is Oil or Demand Behind China’s Factory Inflation?
Reuters attributes the Producer Price Index (PPI) jump to higher oil prices and notes that domestic demand stayed weak.
National Bureau of Statistics (NBS) data, relayed by Futu, shows extractive industries, covering mining and oil and gas, up 27.9%. Processing industries, which make finished goods, gained only 3.5%.
Consumer-goods prices fell 0.1%. That mix suggests Chinese makers are absorbing much of the cost, which could limit what reaches importers’ shelves.
Does Tuesday’s US Inflation Print Decide the Fed’s Path?
The Fed held rates at 3.75% to 4.00% on October 28, with two policymakers voting for a hike instead.
US consumer prices rose 3.7% in the year to September. Energy jumped 20.4%, Bureau of Labor Statistics (BLS) data shows.
China’s reading suggests the same oil shock is still moving through global supply chains.
A Bloomberg consensus sees October’s US Consumer Price Index (CPI) rising 0.3% on the month. Excluding food and energy, forecasters expect 0.2%.
Stocks have felt the link, as Wall Street selloff fears show. The Nasdaq-100 sat 14.7% below its October 6 peak through Thursday.
However, crude fell about 13% last week on hopes for US-Iran talks, so October may mark a peak. A hot CPI print would test the case for patience. A soft one could weaken the case for a hike.
The wider question is whether Chinese cost pressure now adds to a US inflation fight centered on energy.
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