Up or down? China faces inflation conundrum2021|01:30
Weak demand has consumer price inflation cooling off in China. But prices for goods from China's factories are rising at a record pace. And the combination leaves policymakers with a dilemma. Numbers out Thursday (October 14) showed producer prices rose 10.7% on the year in September. That's the highest since records began in 1996. Factory prices are soaring thanks to a power crunch that is raising energy costs. A months-long rally in global commodity prices also fuelled the rise. But makers are struggling to pass on their higher costs to shoppers. Consumer inflation actually slowed last month, dipping to 0.7%. It was capped by weak demand for everything from clothing to household appliances. Food prices also fell. Now economists say the central bank faces a conundrum. Weak demand argues for further support for the economy, but soaring producer prices limit the scope for action. As a result, few expect any cut in interest rates. Some also see hints that consumer prices won't be immune to inflation for much longer. This week China's biggest maker of soy sauce said it would soon raise prices by up to 7%. It says rising costs for raw materials, energy and transport make the move unavoidable.