Surging factory costs to hit wallets in China

Finance | Bloomberg 10 Jun 2021

Surging costs of imported commodities drove China's factory-gate inflation to its highest level since 2008, raising the odds that exporters will begin passing on higher prices and boost inflationary pressures in the global economy.

The producer price index climbed 9 percent in May from a year earlier, driven by price increases for oil, metals and chemicals, the National Bureau of Statistics said yesterday. Consumer inflation increased only 1.3 percent from a year ago, missing an estimate of 1.6 percent and suggesting retailers aren't hiking prices yet due to sluggish domestic demand.

Core CPI, which strips out volatile food and energy costs, rose 0.9 percent, with most of the increase in consumer prices coming from non-food items. The almost 24 percent fall in pork prices undercut stronger price rises for most other foods.

Even though inflation remains comfortably below the CPI target of around 3 percent, the government pledged to increase the supply of key food products to stabilize prices and add to the national pork reserve.

Beijing is also considering imposing a cap on the price of thermal coal as it struggles to contain stubbornly high energy costs ahead of peak demand over the summer, a move to prevent inflationary pressures. One idea under discussion for coal is to limit the price at which miners sell, according to sources.

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