China’s PPI jumps 6.8% on key commodities’ demand
Print Edition
CHINA’S factory gate prices rose at the fastest rate in three and a half years in April as a strong recovery in the world’s number two economy sees a surge in demand for key commodities such as iron ore and copper.
China’s producer price index, a gauge of industrial profitability, rose 6.8 percent in April from a year earlier, the National Bureau of Statistics said, faster than a 6.5 percent rise tipped by a Reuters poll of analysts and a 4.4 percent rise in March.
“In April, domestic industrial production recovered steadily, the prices of international commodities such as iron ore... rose, and prices in the production sector continued to rise,” said senior NBS statistician Dong Lijuan.
“We still expect much of the recent surge in upstream price pressure to prove transitory, with industrial metal prices likely to drop back later this year as a tighter policy stance weighs on construction activity,” Capital Economics analysts said in a note. “We don’t think inflation will rise to the point where it triggers a major policy shift” by China’s central bank, they added.
Chinese authorities have repeatedly said they will avoid sudden policy shifts that could derail economic recovery, but are slowly normalizing policy and clamping down on property speculation in particular.
The sharp jump in producer prices included an 85.8 percent surge in oil and natural gas extraction from a year ago, while ferrous metals processing rose 30 percent, said Dong.
However, the consumer price index rose by a mild 0.9 percent on year, held down by weaker food prices, and analysts said the rising costs from soaring producer prices were unlikely to be fully passed on to consumers.
Dong said the increase came as “domestic consumption continued to recover and prices were generally stable.”
April’s 0.9 percent CPI increase was up on a 0.4 percent rise in March, driven mostly by gains in non-food prices as the services sector recovered. As domestic tourism continued to increase, the prices of air tickets and hotels increased, Dong said.
Non-food prices went up 1.3 percent year on year in April, compared with the 0.7 percent increase in March, with prices of air tickets surging 26.9 percent, while cultural and entertainment services edged up 2.2 percent from a year earlier.
Food inflation remained weak. Prices dropped by 0.7 percent from a year earlier, unchanged from the previous month, weighed by falling pork prices as supply increased.
The structural growth in CPI is increasingly noticeable, Wen Bin, a chief analyst at China Minsheng Bank noted, adding that the momentum of growing non-food prices is increasingly evident.
Consumers could see some price rises ahead from a global chip shortage affecting goods such as home appliances, cars and computers, said Iris Pang, Greater China chief economist at ING.
“We believe that the chip price increase has already pushed up prices of fridges, washing machines, TVs, laptops and car prices in April, which increased 0.6 percent-1.0 percent month-on-month,” she said.
“We expect CPI inflation to jump to around 1.8 percent year on year in May,” said Lu Ting, chief China economist with securities firm Nomura, expecting slightly higher non-food price inflation and favorable base effects to contribute to the growth target.
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