China's February factory inflation slows

China's consumer inflation picked up to the highest since November 2013, largely due to higher food prices as China celebrated the long Chinese New Year holidays, official data showed yesterday.
China's consumer inflation picked up to the highest since November 2013, largely due to higher food prices as China celebrated the long Chinese New Year holidays, official data showed yesterday.PHOTO: AGENCE FRANCE-PRESSE

BEIJING • China's producer price inflation eased to the slowest pace in 15 months in February, as the cost of raw materials and other inputs rose at a milder pace, pointing to a potential softening in industrial sector profits.

Consumer inflation picked up to the highest since November 2013, however, largely due to higher food prices as China celebrated the long Lunar New Year holidays, official data showed yesterday.

Data from China early in the year is typically treated with caution by economists due to business and price distortions caused by the timing of the week-long Lunar New Year celebrations, which fell in late January 2017 but started in mid-February this year.

Analysts expect investors may not get a clearer picture of China's economic health until the first-quarter data is released in April.

The producer price index (PPI) rose 3.7 per cent in February from a year earlier, compared with 4.3 per cent in January, the National Bureau of Statistics said yesterday.

China's factory-gate inflation has now softened for four months in a row, suggesting that profits for miners, steelmakers and manufacturers will start to moderate after surging to their strongest levels in years in 2017. That would give the country's "smokestack" industries, which are dominated by state-owned giants, less cash flow to service and pay down their debts, a key policy goal for Beijing.

Analysts polled by Reuters expected February producer inflation would cool to 3.8 per cent from January's 4.3 per cent. On a month-on-month basis, the PPI fell 0.1 per cent.

The consumer price index rose 2.9 per cent from a year ago, more than expected and quickening from January's gain of 1.5 per cent. Producer inflation is expected to continue to moderate in coming months as property investment cools, reducing demand for products from steel and cement to appliances and furniture.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 10, 2018, with the headline 'China's February factory inflation slows'. Print Edition | Subscribe