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Beijing: Official data on Tuesday showed that China’s April ex-factory prices rose at the fastest rate in three and a half years, as the world’s second-largest economy continued to grow after record growth in the first quarter.
Beijing – As the world’s second-largest economy gains momentum after strong growth in the first quarter, China’s April ex-factory prices rose at the fastest rate in three and a half years, but economists played down the risk of inflation.
Global investors are increasingly worried that stimulus measures driven by the pandemic may trigger a rapid rise in inflation and force central banks to raise interest rates and adopt other austerity measures, which may hinder economic recovery.
According to the National Bureau of Statistics, China’s Producer Price Index (PPI), which measures industrial profitability, rose 6.8% in April from a year earlier, higher than the 6.5% and 4.4% increase in March indicated by Reuters in a survey of analysts.
However, the consumer price index (CPI) rose slightly by 0.9% year-on-year, dragged down by weak food prices. Analysts said that soaring producer prices caused cost rises to be unlikely to be completely passed on to consumers.
Capital Investment’s macro analyst said in a report: “We still expect that most of the recent surge in upstream price pressure will prove to be temporary. As the tightening of policy stances put pressure on construction activities, industrial metal prices may increase. It will fall back later this year.”
They added: “We don’t think inflation will rise to the point where it triggers a major policy change by the People’s Bank of China.”
The Chinese authorities have repeatedly stated that they will avoid sudden policy changes that could undermine the economic recovery, but are slowly normalizing policies, especially against real estate speculation.
Dong Lijuan, a senior statistician at the National Bureau of Statistics, said in a statement after the release of the data that the sharp rise in producer prices includes a surge of 85.8% in oil and natural gas extraction from a year ago, and a 30% increase in ferrous metal processing.
Iris Pang, chief economist for ING Greater China, said that consumers may see price increases due to global chip shortages affecting commodities such as home appliances, automobiles and computers.
“We believe that the increase in chip prices has pushed up the prices of refrigerators, washing machines, TVs, laptops and cars in April, up 0.6%-1.0% month-on-month,” she said.
The CPI rose by 0.9% in April, higher than the 0.4% increase in March, which was mainly due to the rise in non-food prices due to the recovery of the service industry. It did not reach the 1.0% growth expected by analysts.
Sheng Laiyun, deputy director of the National Bureau of Statistics, said on Friday that China’s annual CPI may be far below the official target of about 3%.
Sheng attributed China’s possible moderate inflation to the current slow core inflation, oversupply of economic fundamentals, relatively limited macro policy support, recovery of pork supply, and limited transmission effects from PPI to CPI.
Food inflation remains weak. Prices fell by 0.7% from the same period last year and remained unchanged from the previous month. Pork prices fell due to increased supply.
As China recovered from the devastating effects of COVID-19, China’s gross domestic product (GDP) in the first quarter increased by a record 18.3% year-on-year.
Many economists expect China’s GDP growth to exceed 8% in 2021, although some have warned that continued global supply chain disruptions and a higher base of comparison will weaken some momentum in the coming quarters.
Post time: Jun-06-2021