Tue, Feb 11, 2020 page10

• China’s producer prices halt declines

  UNSUSTAINABLE: Although producer prices edged up 0.1% last month, analysts expect growing headwinds from a novel coronavirus outbreak to disrupt growth

  • Reuters, BEIJING
  • • 
    • 
    • 

  China’s factory gate prices snapped six months of year-on-year declines last month, although prolonged business closures from the 2019 novel coronavirus outbreak mean positive momentum is unlikely to persist.

  The virus has killed more than 900 in China and has also added to price pressures, with consumer inflation hitting a more than eight-year high, as government restrictions on movement drove residents to stock up on essentials.

  China’s producer price index (PPI) rose 0.1 percent from a year earlier, data released by the National Bureau of Statistics yesterday showed, in line with expectations tipped by a Reuters poll of analysts and reversing a 0.5 percent drop in December.

  

  A vendor sits at a fruit stall at a market in Beijing yesterday.

  Photo: EPA-EFE

  Analysts attributed the rise to improving activity in the industrial sector at the end of last year, buoyed by a trade truce with the US and government stimulus, which finally appeared to gain traction.

  However, those gains are not expected to be sustained amid growing economic headwinds from the novel coronavirus.

  “Notwithstanding different coronavirus scenarios, we maintain our view that China’s mini-cycle recovery will be delayed, but not derailed,” Morgan Stanley economists said in a note to clients yesterday.

  Morgan Stanley estimates that the coronavirus could slash up to 2 percentage points off China’s first-quarter growth if factory suspensions nationwide would continue beyond this month.

  The epidemic, which originated in the central Chinese city of Wuhan, has infected more than 40,000 people in the nation, forcing Beijing to extend holidays in key manufacturing bases and impose severe controls in major cities.

  Movement of goods and people has also been severely disrupted, with some firms — including South Korea’s Hyundai Motor Co and Japan’s Nintendo Co — expecting major disruptions in their supply chains.

  This has prompted some economists to drastically lower their GDP growth estimates for the first quarter and the full year.

  Beijing is mulling slashing its full-year growth target of about 6 percent and readying fiscal and monetary stimulus to counter the effects of the outbreak, policy sources have said.

  China’s consumer price index rose 5.4 percent from a year earlier last month, beating the 4.9 percent rise tipped by a Reuters poll of analysts and a 4.5 percent rise in December. It was also the fastest acceleration since October 2011.

  The bureau in a commentary on the data attributed the acceleration in consumer prices to the Lunar New Year holiday, the coronavirus outbreak and a lower base from last year.

  Food prices surged 20.6 percent last month from a year earlier, while pork prices more than doubled.

  “We believe the coronavirus outbreak may keep CPI inflation above 4.0 percent y-o-y in H1 2020 due both to hoarding by households (e.g., food and other supplies), disruptions to transport and supply shocks as a result of those lockdowns,” Nomura Holdings Inc analysts said in a note yesterday. “That said, we believe PPI inflation is poised to decline due to a big slowdown in property and infrastructure investment.”
• Most Popular

  • 1

    Dozens of Taiwanese missing in China

  • 2

    PRC likely to launch drills after National Day speech

  • 3

    US military declines to fire adopting Marine Mast

  • 4

    Formosan black bear punching Winnie the Pooh badge a hit at Japan festival

  • 5

    PRC could not be ‘motherland,’ William Lai says