China factory prices jump in March
By Sean Farrell
Date: Friday 09 Apr 2021
(Sharecast News) - China's factory gate prices rose faster than expected in March and at the fastest pace for almost three years as higher commodity costs fed through in the world's biggest manufacturing nation.
The country's producer price index rose 4.4% from a year earlier, the National Bureau of Statistics said. The jump outstripped the 3.5% increase expected by analysts and was far stronger than the 1.7% rise in February.
China's consumer price index rose 0.4% from a year earlier, beating a 0.3% consensus forecast in a Reuters poll. The result showed inflation returning after two months of falling prices.
Steepening producer prices are the latest sign that China's economy is recovering from the Covid-19 pandemic, which shut the country for large parts of 2020 and caused recessions in China's main export markets. Manufacturing expanded rapidly and the recovery in services accelerated in March, surveys have shown.
Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said factory prices showed higher commodity prices feeding through earlier than expected with energy and chemicals "beginning to hot up" while the drag from main manufacturing goods reduced.
As the world's largest exporter, China's rising factory prices could increase global inflationary pressures if manufacturers pass on higher commodity prices to customers. Some analysts argue inflation is about to take off, triggered by rising costs for businesses and the Biden administration's fiscal stimulus measures in the US.
"Inflation [in China] could now peak above 10% in May," Beamish said. "It will retreat reasonably quickly, next year, but should stay elevated through 2021. That puts the [People's Bank of China] on the front foot to continue normalisation, with officials already flagging the heat in commodities prices, though the authorities will also address inflation through industrial policy.
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