Chinese factory costs rise

Producer prices in China started to grow in September.

China's producer prices accelerated at the fastest pace since 2008, according to a survey by financial analyst Bloomberg. The producer price index was expected to grow by 7.7 per cent, but actually rose by 7.8 per cent during February year-on-year. This follows 4½ years of deflation which ended last September. Although producer inflation is climbing and a boost in demand is fuelling commodity prices, economists believe that such forces will moderate.

"Everything has peaked in the first quarter," said Larry Hu, head of China economics at Macquarie Securities in Hong Kong. "The strong numbers we are seeing now are not sustainable."

Despite a higher-than-expected increase in factory production prices, the consumer price index rose by only 0.8 per cent compared to the 1.7 per cent forecast – primarily due to falling food prices, fewer tourists and cheaper accommodation after the Chinese New Year holiday.

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This article was originally published on page 6 of the April 2017 issue of SATRA Bulletin.

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