China's factory prices snap year-long decline as demand recovers

Beijing

CHINA'S factory gate prices, the price at which a factory sells goods to wholesalers, rose in annual terms in January for the first time in a year, as months of strong manufacturing growth in the country pushed raw material costs higher.

The producer price index (PPI) rose 0.3 per cent from the year before, the National Bureau of Statistics (NBS) said in a statement; it was the fastest rate of growth since May 2019, but slightly lagging a 0.4 per cent gain tipped by a Reuters poll of analysts. PPI fell 0.4 per cent in December.

Consumer prices, however, unexpectedly slipped into deflation in January, the first time upstream prices have risen faster than downstream costs in more than two years.

China's return to factory-gate inflation was driven by increases in upstream raw materials, said Betty Wang, an analyst at ANZ. Over the next months, PPI "may extend the uptrend and rise positively", she said.

The country's factories staged an export-driven recovery in 2020, thanks to global demand for home electronics and anti-epidemic goods, and as other manufacturing economies faced Covid-19 lockdowns.

The economy is expected to grow 8.4 per cent this year, following a 2.3 per cent rise last year in the wake of the Covid-19 pandemic that forced a lockdown in the March quarter.

A resurgence of the virus last month raised concerns about temporary disruptions to production. Some regional authorities imposed measures such as home quarantines and travel curbs following the country's worst outbreak since March 2020.

China's factory activity grew at the slowest pace in five months in January, official data showed last week, reflecting the outbreak's impact on production and transportation.

The consumer price index (CPI) fell 0.3 per cent in January from a year earlier, the NBS said separately, compared with no change tipped by the Reuters poll and a 0.2 per cent rise in December. REUTERS