China producer inflation hits six-month high, consumer inflation rises slightly

Reuters, BEIJING

Wed, Jul 11, 2018 - Page 10

China’s producer inflation last month accelerated to a six-month high, lifted by strong commodity prices and threatening to put more pressure on the country’s exporters as a trade war escalates between Washington and Beijing.

Annual consumer inflation also edged up as food prices rose at a faster pace, official data showed yesterday, though the central bank is likely to remain more focused on cushioning the slowing economy than retail prices.

The US and China last week slapped tariffs on US$34 billion of each others’ goods, fueling fears of a prolonged battle that would hurt global trade, investment and growth, while also damaging US farm exports and potentially driving up food prices in China.

The producer price index (PPI) — a gauge of industrial profitability — last month rose by a stronger-than-expected 4.7 percent from a year earlier, compared with a 4.1 percent increase in May, according to the Chinese National Bureau of Statistics.

China’s producer inflation has now picked up for three months in a row after easing late last year.

On a month-on-month basis, the PPI rose 0.3 percent last month, compared with 0.4 percent growth in May.

Analysts polled by Reuters had expected last month’s producer inflation would pick up to 4.5 percent, buoyed by a recovery in global commodity prices.

Raw material prices jumped 8.8 percent from a year earlier, compared with a 7.4 percent increase in May.

The higher prices have helped fuel sharp gains in earnings, with profits at China’s industrial firms growing at a sizzling pace in May.

However, much of the jump has been in prices of resources, such as oil and coal, and other raw materials, benefiting producers, but raising input costs for manufacturers such as exporters who are further along supply chains.

The intensifying trade dispute with the US did rattle China’s commodity markets last month, after both sides imposed tit-for-tat duties on each other’s imports on Friday.


The consumer price index (CPI) last month rose 1.9 percent from a year earlier, in line with expectations for a slight pickup from May’s gain of 1.8 percent.

The CPI fell 0.1 percent on a monthly basis.

The core consumer price index, which strips out volatile food and energy prices, was unchanged at 1.9 percent.

The food price index rose 0.3 percent from a year earlier, after ticking up 0.1 percent in May. Non-food prices rose 2.2 percent, compared with 2.2 percent growth a month earlier.

Prices of agricultural products in particular are expected to jump after Beijing imposed tariffs on imports of US soybeans and other products used to feed its huge livestock sector.