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China’s consumer price index (CPI) eased to minus 0.2 per cent in February from a year earlier, from minus 0.3 per cent in January. Photo: AFP

China inflation: factory gate prices jump in February as producers pass on rise in raw materials prices

  • China’s official producer price index (PPI) rose to 1.7 per cent in February from a year earlier, compared with 0.3 per cent in January
  • China’s consumer price index (CPI) eased to minus 0.2 per cent in February from a year earlier, compared to minus 0.3 per cent in January

China’s factory gate prices continued to rise in February, as producers passed on rising raw material prices, data released on Wednesday showed.

The producer price index (PPI), which reflects the prices that factories charge wholesalers for their products, rose to 1.7 per cent in February from a year earlier, the highest rate since November 2018 and a sharp increase from the gain of 0.3 per cent in January.

This was above expected, with a Bloomberg survey of analysts predicting a rise to 1.3 per cent.

The price of the means of production rose by 2.3 per cent in February, 1.8 percentage points higher than in January and accounting for the entire rise in the PPI last month, the National Bureau of Statistics (NBS) said.

Prices for commodities like crude oil and copper rose sharply in February on expectations of a strong global economic rebound, helped by the Biden administration’s US$1.9 trillion coronavirus rescue plan.

In China, higher raw material prices, due to higher international prices and to rising domestic demand, were increasingly passed on to end users.

“Due to the continued upward trend of international crude oil prices, prices in domestic petroleum-related industries continue to rise,” the NBS said in a statement.

In addition, “with the increase in domestic demand and the continued rise in international metal commodity prices, the prices of domestic ferrous metal mining and dressing, ferrous metal smelting and rolling processing industry, and non-ferrous metal smelting and rolling processing industry have risen, respectively.”

Among major PPI categories, ferrous metal smelting and rolling processing costs increased by 14.1 per cent, 4.2 percentage points higher than January, while non-ferrous metal smelting and rolling processing costs rose 12.1 per cent, up 3.2 percentage points from the previous month.

Coal mining and washing costs rose 10.9 per cent, up 1.8 percentage points, while costs in the chemical raw materials and chemical products sector rose 4.0 per cent, up 2.8 percentage points on the month.

China’s official consumer price index (CPI), meanwhile, eased slightly to minus 0.2 per cent in February from a year earlier, from minus 0.3 per cent in January, the NBS said.

This was above the Bloomberg survey median, which had predicted a stable rate of minus 0.3 per cent.

China’s core consumer inflation rate, excluding volatile food and energy prices, was flat in February compared to a year earlier, up from minus 0.3 per cent in January.

Food prices fell 0.2 per cent in February, a sharp turnaround from the rise of 1.6 per cent last month.

The price of pork – a staple meat on Chinese dinner tables – plunged 14.9 per cent compared to a year earlier, lower than the readings of minus 3.9 per cent in January and minus 1.3 per cent in December.

Non-food prices fell 0.2 per cent in February year on year, up from a reading of minus 0.8 per cent the previous month.

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