Chinese factory prices surge most since 2011

British consumer prices rose last month at the fastest pace since June 2014 and are set to rise further, propelled by higher global oil prices and the Brexit-fuelled fall in the pound. China's producer price inflation also picked up.VIDEO: REUTERS
Workers loading steel pipes at a port in Lianyungang, in east China's Jiangsu province. The rise of the producer price index can be attributed to sectors including oil and gas extraction, coal mining and steel production, the National Bureau of Stati
Workers loading steel pipes at a port in Lianyungang, in east China's Jiangsu province. The rise of the producer price index can be attributed to sectors including oil and gas extraction, coal mining and steel production, the National Bureau of Statistics said.PHOTO: AGENCE FRANCE-PRESSE

BEIJING • China's producer prices increased the most since 2011, with the world's biggest exporter further lifting the outlook for global inflation.

The producer price index (PPI) rose 6.9 per cent last month from a year earlier, compared with a 5.5 per cent December gain. The consumer price index (CPI) climbed 2.5 per cent, boosted by the week-long Chinese New Year holiday beginning last month, the National Bureau of Statistics (NBS) said yesterday.

China is again exporting inflation as factories increase prices after emerging from years of deflation. That fresh strength may moderate in coming months as year- ago comparisons gradually rise and United States President Donald Trump's policies add uncertainties to the global demand outlook.

Continued pressure for raw materials is forcing companies to increase prices, according to Mr Tao Dong, senior adviser for Asia-Pacific private banking at Credit Suisse Group in Hong Kong.

"Without strong demand, producers have limited space for price hikes," he said. "But I see a wide range of price increases because the cost push is so severe."

Both consumer and producer inflation will peak soon, Mr Julian Evans-Pritchard, an economist at Capital Economics, wrote in a report. "Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium term," he said.

The rise of the PPI can be attributed to sectors including oil and gas extraction, coal mining and steel production, the NBS said in a statement with the data.

The pickup in CPI was partially due to the timing of the Chinese New Year holiday as millions splurged on feasts, gifts and travel, driving up prices.

Rising inflation will probably help support nominal growth, according to Morgan Stanley.

The expansion pace adjusted for price changes will accelerate from 8 per cent last year to 9.4 per cent this year even as real growth edges down to 6.4 per cent from 6.7 per cent, economists Robin Xing and Jenny Zheng wrote in a note.

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A version of this article appeared in the print edition of The Straits Times on February 15, 2017, with the headline 'Chinese factory prices surge most since 2011'. Print Edition | Subscribe