Soaring factory prices in China add to global inflation risks, economic news and current affairs

BEIJING (BLOOMBERG) – Ex-factory prices in China rose more than expected in April, fueled by rapid gains in commodity prices, adding to concerns about global inflation.

The producer price index rose 6.8% from a year earlier, its fastest pace since October 2017, after gaining 4.4% in March, the Bureau said on Tuesday (May 11). national statistics. The median forecast was an increase of 6.5%. Consumer prices rose 0.9 percent year-on-year, slightly below the 1 percent gain expected by economists.

The commodities boom, fueled by rising global demand and supply shortages, has fueled concerns about inflation around the world. With China being the world’s largest exporter, its mounting cost pressures for factories in the country pose another risk to global inflation as manufacturers begin to pass higher prices on to retailers.

The surge in factory prices is due to “a combination of domestic and international factors,” said Iris Pang, chief economist for Greater China at ING Bank. They include strong domestic demand for raw materials due to continued momentum in infrastructure and property projects in China, as well as higher material price expectations globally thanks to the infrastructure construction plan in China. United States, Pang said.

Asian stocks and US stock futures slipped Tuesday after a tech-driven Wall Street slump as soaring commodity prices fueled concerns about inflation. A US CPI report on Wednesday is also expected to show a strong gain in April.

The NBS said the rise in producer prices was due to a steady recovery in domestic production and higher prices for iron ore and non-ferrous metals. Consumer inflation, meanwhile, has remained relatively subdued amid falling pork prices, a key component of the country’s CPI basket.

Central bankers at the declining US Federal Reserve argue the recent price hikes 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. Yet officials have pledged to tighten controls on the commodity market to keep costs down for businesses.

The widening gap between the CPI and the PPI “suggests an uneven recovery in the economy,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group. “Despite the commodity boom, the service sector has yet to catch up.” Wages are lagging behind and the central bank will likely keep its policy “largely neutral,” he said.

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, China’s main decision-making body, said last month that there would be no abrupt reversal of macroeconomic policies.

China aims to keep 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.