China’s Inflation Rises at Fastest Pace in Two Years

Still, economists say inflation in China is likely to ease over the coming months, largely as a result of feeble economic growth.

Data due Friday was expected to have shown that China’s export growth slowed again in September, as rocketing inflation and rising interest rates ate into consumer spending overseas. But as of late Friday evening in China, the figures hadn’t been released. China’s General Administration of Customs offered no explanation and didn’t answer calls seeking comment.

China is due to release gross domestic product figures for the third quarter on Tuesday. The country in the second quarter had registered its weakest growth since the onset of the pandemic, as efforts to contain outbreaks of Covid-19 hit activity in Shanghai and other major cities.

Business surveys and data for July and August suggest the recovery since has been lackluster, with the economy under pressure from a severe real-estate downturn, a summer drought and a collapse in consumer confidence. The global economy is losing steam as the U.S. Federal Reserve and other central banks ratchet up borrowing costs to tame inflation.

The economic headwinds  come as the ruling Chinese Communist Party gathers in Beijing for a congress at which leader

Xi Jinping

is expected to break with recent precedent and secure a third term in power. Chinese leaders are facing the daunting challenge of fostering a durable revival in China’s economy while solving deeper problems, including big debts, worsening relations with the U.S. and what many economists say is an overreliance on exports and investment to power growth.

The International Monetary Fund this month cut its forecast for growth in China this year and next, citing a darkening backdrop for exports and a worsening real-estate slump. If growth matches its 2022 forecast of 3.2%, compared with a forecast of 3.3% in July, that would represent the worst year for growth in China in four decades, the fund said, excluding 2020 when the effects of the Covid-19 pandemic first struck.

Friday’s data showed inflation in China accelerated on the back of sharply higher pork prices and a pickup in prices for vegetables. Pork prices have been propelled by shortages, and the government has signaled it will release more meat into the market from a state reserve to tame further increases.  

Economists polled by The Wall Street Journal had expected annual inflation to accelerate to 2.9% in September, ahead of the 2.8% reading published Friday. Despite the gain, inflation in China remains within the authorities’ goal of keeping consumer-price inflation below 3%, and is well short of the 8.2% annual rate of inflation the U.S. reported for September earlier this week.

Other data reinforced the picture of subdued inflationary pressure in China. Annual producer price inflation, a measure of the prices charged by companies at the factory gate, slowed for the 12th straight month to just 0.9% in September, statistics bureau figures showed.

Economists polled by The Wall Street Journal had expected China’s export growth to slow to 4.0% in September, down from a 7.1% increase in August, reflecting weakening global demand. Imports likely grew 1% from a year earlier, compared with the 0.3% growth in August, according to the poll.

—Grace Zhu in Beijing contributed to this article.