China’s factory-gate inflation hits four-month high, food prices surge


China’s factory-gate inflation in April quickened at its fastest pace in four months, buoyed by higher commodity prices and a sign demand may be starting to perk up as Beijing rolls out more stimulus.

Consumer inflation also accelerated, jumping to the highest pace in six months, official data showed on Thursday, as pork price remained elevated due to supply issues from a growing swine fever epidemic.

China’s producer price index (PPI) in April rose 0.9 percent from a year earlier, the quickest pace since December, driven largely by rapid rises in oil and gas prices, and advancing from a 0.4 percent increase in March, the National Bureau of Statistics (NBS) said. Analysts polled by Reuters had expected factory gate inflation would nudge up to 0.6 percent in April.

Analysts and investors are closely watching inflation gauges in China to see whether there has been real improvement in underlying demand, which would support industrial profits and investment.

The pick-up in producer inflation suggests the world’s second-largest economy may slowly be responding to support, as authorities seek to head off external risks such as trade tensions with the United States, which unexpectedly escalated this week.

However, some analysts remain concerned about the true state of the demand factors driving China’s economy.

“Looking ahead, higher food inflation will probably continue to push up CPI (consumer price index) in the coming months,” Capital Economics Senior China Economist Julian Evans-Pritchard said. “But with economic growth unlikely to stage a strong recovery and industrial commodity prices likely to drop back before long, we don’t anticipate much upside to PPI and non-food CPI.”

Most of the PPI gain was driven by ferrous metal ore mining, with prices rising 10.6 percent on-year, up from 5.8 percent in March.

To arrest a sharper slowdown of the economy, Beijing has fast-tracked big-ticket infrastructure projects, which are pushing up prices of construction materials.

China’s iron ore futures posted their fifth straight monthly gain for April while construction steel marked its best month since July 2018, fueled by hopes that demand will remain firm as construction activities typically pick up in May and June when the weather is usually favorable.

Imports of copper, widely used in construction and manufacturing, also rose in April from March.

On a monthly basis, producer prices inched up 0.3 percent, for the second consecutive month after a marginal step-up in March.

Stronger factory-gate price rises have bolstered profits for industrial firms, which saw earnings rebound from four months of contraction in March.

China’s economy posted surprisingly strong data in March, stoking debate over how much more stimulus China needs to generate a sustainable recovery, however, initial April readings have been more subdued.


The consumer price index (CPI) in April rose 2.5 percent from a year earlier, a six-month high, fueled by higher pork prices as the spread of African swine fever prompts farmers to cull their herds.

That was more than a 2.3 percent increase in March and in line with market expectations.

On a month-on-month basis, CPI rose 0.1 percent, compared with a 0.4 percent drop the preceding month.

The food price index in April rose 6.1 percent from a year earlier, marking the fastest pace in April 2016, and much higher than March’s reading of 4.1 percent.

Pork prices rose 14.4 percent in April from a year earlier, rising for the second consecutive month following a more than two-year declining streak, and contributed to about 0.31 percentage points of CPI gains for the month, the NBS said in a statement.

Chinese pork prices are expected to jump 70 percent in the second half of the year, the country’s agriculture ministry said last month, after the swine fever outbreak.

Source: Reuters

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