Wed, Jan 11, 2017 - Page 12 News List

Factory-gate inflation in China hit 5.5% last month

AFP, BEIJING

Chinese producer prices rose at their swiftest pace in more than five years last month, the Chinese government said yesterday, a sign the world’s factory could begin exporting inflation to the global economy.

The producer price index (PPI) rose 5.5 percent year-on-year last month, the Chinese National Bureau of Statistics said, far more than economists’ expectations of 4.6 percent in a Bloomberg News survey.

It marked the fourth straight month of price rises for goods at the factory gate after years of declines and an acceleration from the previous month’s 3.3 percent, raising expectations China’s factories could put upward pressure on global prices through the supply chain.

Rising prices for industrial commodities helped support the forecast-beating PPI figures, the bureau said, as world producers cut supply.

The consumer price index (CPI), a key gauge of retail inflation, rose 2.1 percent year-on-year last month, slightly below expectations.

The figures were affected by warmer temperatures across China, which led to weaker-than-average price increases for fresh fruit and vegetables, the bureau said in a statement.

China is the world’s biggest trader in goods and its performance affects its trading partners from Australia to Zambia, many of which have been mired in tepid inflation for years, which has in turn caused a drag on the global economy.

Chinese firms have been battered by falling prices for their goods in the face of chronic overcapacity and weak demand, putting a damper on growth in the nation.

Protracted falls in factory-gate prices are a bad sign for industrial prospects and economic growth because they put off customers — who seek to delay purchases in anticipation of cheaper deals — starving companies of business and funds.

The ongoing rebound in producer prices could help boost China’s nominal GDP growth this year, Nomura said in a note, though real growth “still faces plenty of headwinds.”

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