China producer prices soar alongside commodity boom by Bloomberg

© Reuters. Producer prices in China soar alongside soaring commodities

(Bloomberg) – Factory-gate prices in China rose more than expected in April, supported by gains in commodity prices and a weak base from last year, while the consumer inflation remained relatively subdued.

The producer price index rose 6.8% from a year earlier, the highest since October 2017, after gaining 4.4% in March, the National Bureau of Statistics said on Tuesday. The median forecast was an increase of 6.5%. Consumer prices rose 0.9% year on year, slightly below the 1% gain projected by economists.

The commodities boom, fueled by rising global demand and supply shortages, has fueled concerns about inflation around the world. As the world’s largest exporter, rising PPI in China is another risk to global inflation, as manufacturers begin to pass higher prices on to retailers.

Central bankers at the Bearish US Federal Reserve argue the price increases are temporary. In China, policymakers insist that the impact of commodity prices on the national economy will be limited and that price growth generally remains under control. Still, officials have pledged to tighten controls on the commodity market to keep costs down for companies.

Click here for a breakdown of producer prices in China in April

Consumer inflation has remained relatively amid falling pork prices, a key component of the country’s CPI basket.

The People’s Bank of China is looking to cut the stimulus it injected into the economy during last year’s pandemic, concerned about the build-up of debt. Economists expect policymakers to slow the pace of credit expansion rather than raise interest rates. The Communist Party’s Politburo, the main decision-making body, said last month that there would be no abrupt reversal in macroeconomic policies.

China aims to keep its consumer inflation at around 3% this year, but an NBS official said in a recent interview that the overall index is expected to be “significantly lower” than the official target in 2021.

© 2021 Bloomberg LP

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