China's producer price inflation at 4-month low

A man shovels coal into a tray next to an oven he uses to heat his home in his kitchen in the village of Heqiaoxiang outside of Hebei province, China on Dec 5, 2017.
A man shovels coal into a tray next to an oven he uses to heat his home in his kitchen in the village of Heqiaoxiang outside of Hebei province, China on Dec 5, 2017.PHOTO: REUTERS

BEIJING • China's producer price inflation slowed to a four-month low last month as factory activity softened due to the government's ongoing efforts to curb pollution, cooling demand from factories for raw materials.

Producer prices rose 5.8 per cent from a year earlier - the lowest since July, the National Bureau of Statistics said yesterday. The rise was slightly less than market expectations and compared with the previous month's 6.9 per cent rise.

Analysts polled by Reuters had predicted the producer price index (PPI) last month would increase an annual 5.9 per cent, easing back also because of a high base a year earlier.

"The environmental protection drive could affect production of middle-and low-stream firms, easing demand for raw materials," said Minsheng Bank economist Wen Bin. "Looking ahead, producer price inflation is likely to slow steadily due partly to the high base effect."

On a month-on-month basis, the PPI rose 0.5 per cent in November. As northern China officially entered the heating season in mid-November, the government has stepped up efforts to address winter smog, ordering many steel mills, smelters and factories to curtail or halt production to rein in pollution.

Analysts expect producer price pressures to recede as the war on smog curtails production, cooling demand from factories for raw materials. Raw material prices rose 7.5 per cent last month year-on-year, compared with 9 per cent in October, statistics bureau data showed.

The government's plan ordering millions of households in northern China to convert to gas heating from coal this year caused an unexpected shortage in natural gas supplies as prices soared despite a record amount of natural gas imports last month.

REUTERS

A version of this article appeared in the print edition of The Sunday Times on December 10, 2017, with the headline 'China's producer price inflation at 4-month low'. Print Edition | Subscribe