• By The Financial District

CHINA FRETS AS IT RECORDS HIGHEST PRODUCER INFLATION IN 12 YEARS

China's May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalize COVID-hit growth, Reuters reported.

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Investors are increasingly worried pandemic-driven stimulus measures could supercharge global inflation and force central banks to tighten policy, potentially curbing the recovery.


China's producer price index (PPI) increased 9.0%, the National Bureau of Statistics (NBS) said on Wednesday, as prices bounced back from last year's pandemic lows. The PPI rise in May - the fastest on-year gain for any month since September 2008 - was driven by significant price increases in crude oil, iron ore and non-ferrous metals, NBS said.


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Analysts in a Reuters poll had expected the PPI to rise 8.5% after a 6.8% increase in April. Shortly after the inflation data, the National Development and Reform Commission said China will closely monitor price movements of commodities and step-up price forecasts to maintain market order.


"The worry is PPI may hover at an elevated level for an extended period of time, which would create economic headaches if mid- or downstream firms fail to absorb higher costs," said Nie Wen, chief economist at Hwabao Trust.


The PPI surge has yet to substantially feed through to consumer inflation, meaning the People's Bank of China is unlikely to worry for now. Consumer prices rose 1.3% in May - the biggest year-on-year increase in eight months - but came in below expectations for a 1.6% gain. Consumer inflation remained well below the government's official target of around 3%.



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