China's record factory inflation poses another threat to supply chains
Hong Kong (CNN Business) The cost of goods leaving China's factories is surging by the highest rate on record, stoking fears about stagflation in the world's second largest economy at a time when it is already grappling with an extreme power crunch and deepening debt woes.
The producer price index — which measures the cost of goods sold to businesses — soared 10.7% in September from a year ago, according to government data released Thursday.
That is the fastest increase since 1996, when the government began releasing such data, according to Eikon Refinitiv data.
"higher prices in coal and products from energy-intensive sectors," Dong Lijuan, senior statistician at China's National Bureau of Statistics, said in a statement.
Coal prices The spike can be attributed to"higher prices in coal and products from energy-intensive sectors," Dong Lijuan, senior statistician at China's National Bureau of Statistics, said in a statement.
Coal prices are at record highs in the country as supplies struggle to keep pace with demand from power stations.
Thursday's data shows that the rising costs of raw materials are cutting aggressively into Chinese company profits, a problem that could force them to slow production or even shed workers.
Some factories have reduced shifts because of power rationing.
Companies sourcing goods in China are already struggling with port congestion, soaring freight rates and delays.
Rising prices and reduced production could spell further trouble for global supply chains that are already under tremendous strain .
Analysts at Citi wrote in a Thursday note that global inflation could keep climbing as China's "supply shock ripples through global supply chains."