China’s May Factory Gate Prices Jump at Fastest Pace Since 2008 By

© Reuters.

By Gina Lee – China’s factory-gate prices jumped in May driven by surging commodity prices. Consumer prices also increased for the third consecutive month but at a lower-than-expected pace.

The (PPI) increased 9.0% year-on-year in May, higher than 8.5% in forecasts prepared by the highest rate of growth since 2008. The rise was also higher than the 6.8% growth during the previous month, according to data released by the National Bureau of Statistics (NBS).

The jump in PPI was driven by price surges in , iron ore and non-ferrous metals, said the NBS in a statement. Commodity prices, including coal, steel, iron ore and , surged in 2021 driven by demand recovery in post-lockdown areas and ample global liquidity.

China’s PPI is likely to climb through the second and third quarters due to higher commodity prices and low bases in 2020 before moderating later in 2021, said People’s Bank of China.

China’s policymakers have pledged to take measures to curb soaring commodity prices, including increasing supplies of raw materials and cracking down on speculation and hoarding.

However, soaring producer prices have yet to pass through to consumer prices.

The (CPI) increased 1.3% year-on-year in May, below a 1.6% increase in forecasts prepared by but higher than 0.9% gains during the previous month. The also contracted 0.2% month-on-month in May, higher than forecasts prepared by

Higher metal prices have mainly impacted upstream industries involved in the mining and processing of raw materials, and have had minimal influence on downstream industries like furniture and textiles, said Bloomberg Economics in an analysis.

Meanwhile, competition among smaller businesses intensified due to the rise of ecommerce and decrease in domestic demand, indicating that China’s factories are absorbing rising input costs rather than passing them on to consumers.

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