China factory price surge signals global pressures

China’s factory-gate prices rose at their fastest annual pace in over 12 years in May, driven by surging commodity prices, highlighting global inflation pressures at a time when policymakers are trying to revitalise COVID-19 hit growth.

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

China’s producer price index (PPI) increased 9%, the National Bureau of Statistics (NBS) said, as prices bounced back from last year’s pandemic lows. The PPI rise was driven by significant price increases in crude oil, iron ore and non-ferrous metals, it said.

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

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