China's factory inflation eases as commodities rebound weakens

Workers on a production line at the Huajian shoe factory in Dongguan, Guangdong province, on Sept 14, 2016.
Workers on a production line at the Huajian shoe factory in Dongguan, Guangdong province, on Sept 14, 2016. PHOTO: AFP

BEIJING (BLOOMBERG) - China's producer price gains slowed last month from a peak in February, decelerating for the first time since September 2015 and tempering the global inflation outlook.

The producer price index rose 7.6 per cent last month from a year earlier, compared with the median estimate of 7.5 per cent in a Bloomberg survey and a 7.8 per cent increase in February.

The consumer price index rose 0.9 per cent in March, compared with a 0.8 per cent gain in February.

Slowing factory inflation may dent optimism about a recovery in global demand, and curb China's contribution to worldwide reflation. The rebound in recent quarters had provided the government respite to rein in borrowing, tighten monetary policy, and cool a frenzy of speculation in the housing market.

"It looks like there's a lot of inflation momentum at the producer level, which is good because they'll have higher profits and more money to invest," Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole in Hong Kong, said in a Bloomberg Television interview. "It seems like PPI has peaked, it will remain fairly high in the second quarter and begin to slide in the second half of the year when base effects are out of the way."

Producer prices fell month-on-month for the third time this year. The momentum of producer price hikes in key sectors has started easing, according to a statement released on NBS website.