China ex-factory prices have increased the most in over 3 years

A worker wearing a face mask works on a production line of steel bicycle rims in a factory, as the country is hit by the outbreak of the novel coronavirus, in Hangzhou, Zhejiang province, China March 2, 2020 China Daily via REUTERS

Factory exit prices in China rose at the fastest rate in three and a half years in April, official data showed on Tuesday, as the world’s second-largest economy continued to gain momentum after record growth in the first trimester.

The Producer Price Index (PPI), a measure of industrial profitability, rose 6.8% from a year earlier, the National Bureau of Statistics said, ahead of a 6.5% increase according to a Reuters survey of analysts and a rise of 4.4% in March. The consumer price index (CPI), however, rose by a modest 0.9%.

Investors around the world are increasingly concerned that the stimulus measures linked to the pandemic could cause inflation to rise rapidly and force central banks to raise interest rates and take other tightening measures, which could slow down the economic recovery.

“The price spikes have spread to intermediate products and will continue to affect intermediate and downstream goods, causing costs to rise for the whole company,” said Hu Yanhong, analyst at Yingda Securities.

“It could become an obstacle to economic progress.”

Chinese officials have repeatedly stated that they will avoid sudden policy changes that could derail the recovery, but are slowly normalizing policy and cracking down on real estate speculation in particular.

The sharp rise in producer prices included an 85.8% increase in the oil and gas extraction sector from a year ago, while the smelting and processing of ferrous metals increased by 30%, said Dong Lijuan, senior statistician of the NBS in a statement accompanying the data release. .

Still, the PPI rose 0.9% in April from a month ago, after gaining 1.6% the month before.

Chinese export growth exceeded market expectations in April, while imports for the month hit their highest level in a decade, official data showed on Friday, highlighting robust economic activity for the world’s second-largest economy. Read more

The country’s gross domestic product (GDP) grew a record 18.3% in annual terms in the first quarter as the country recovered from the devastating impact of COVID-19. Many economists expect China’s GDP growth to exceed 8% in 2021, although some warn that persistent disruptions in the global supply chain and higher bases of comparison will undermine momentum over the course of for the next few quarters.

The 0.9% increase in the CPI in April from a year earlier was up from a 0.4% increase in March, mainly on higher prices for non-food items. However, it missed analysts’ expectations for a 1.0% increase.

Food inflation has remained low. Prices fell 0.7% from a year earlier, unchanged from the previous month, weighed down by lower pork prices.

Non-food inflation accelerated to 1.3% year-over-year in April, following an increase of 0.7% the previous month, as air fares and retail oil prices rose. leaped.

Core inflation, which excludes volatile energy and food prices, rose 0.7% in April, from 0.3% in March.

Despite mounting pressure from imported global inflation, China’s full-year CPI is likely to be significantly below the official target of around 3%, NBS deputy director Sheng Laiyun said in an interview on Friday. with Economics Daily.

Sheng attributed China’s likely moderate inflation to currently sluggish core inflation, economic fundamentals where supply outstripped demand, relatively weak macro-policy support, the recovery in pork supply, and a limited pass-through effect from PPI to CPI.

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