China’s headline factory-gate inflation rose at the slowest pace in eight months, according to data released on Wednesday, but rising commodity prices in response to the war in Ukraine have started to filter through. The official producer price index (PPI), which reflects the prices that factories charge wholesalers for products, rose by 8.8 per cent in February from a year earlier, down from a rise of 9.1 per cent growth in January. This was above expectations of analysts surveyed by Bloomberg, who had predicted a fall to 8.6 per cent growth, and was the slowest annual growth since June, when CPI also rose by 8.8 per cent. But senior National Bureau of Statistics statistician Dong Lijuan confirmed a month-on-month increase as the PPI was “affected by the increased commodity prices globally such as crude oil and non-ferrous metals”. “Producer price inflation declined … But this was due to base effects. In month-on-month terms, prices rose 0.5 per cent, the most since last October. The main drivers were higher prices of oil, gas and iron ore,” Julian Evans-Pritchard, senior China economist at Capital Economics. “Inflation will pick up further in the near-term. The surge in global commodity prices following Russia’s invasion of Ukraine will have a much more pronounced impact on the March figures.” Meanwhile, the official consumer price index (CPI) rose by 0.9 per cent in February from a year earlier, unchanged from a rise of 0.9 per cent in January. This was in line with the expectations of analysts in a Bloomberg survey, which had predicted an unchanged reading last month. “In February, affected by the Chinese New Year holiday and the fluctuation of international energy prices, CPI saw a bigger month-on-month increase,” added Dong after CPI rose by 0.6 per cent month on month. On Saturday, Premier Li Keqiang set a target for CPI growth this year at “around 3 per cent” while delivering the government work report for 2022. Food prices fell by 3.9 per cent from a year earlier, down from a fall of 3.8 per cent in January. Non-food prices rose by 2.1 per cent last month, year on year, up slightly from a reading of 2 per cent growth in January. With commodity prices soaring in response to the war in Ukraine, inflation will rise further in the near-term. But we think this is unlikely to prevent further policy easing Julian Evans-Pritchard China’s core consumer inflation rate, excluding the volatile prices of food and energy, rose by 1.1 per cent in February compared with a year earlier, down from a rise of 1.2 per cent in January. The price of pork – a staple meat on Chinese plates – plunged by 42.5 per cent compared with a year earlier in February, down from a fall of 41.6 per cent in January. “Chinese inflation picked up last month, though this was masked in the headline figures by base effects. With commodity prices soaring in response to the war in Ukraine, inflation will rise further in the near-term. But we think this is unlikely to prevent further policy easing,” added Evans-Pritchard. “CPI inflation held steady at 0.9 per cent, year on year, in February, in line with consensus expectations. But prices began rising again in seasonally adjusted month-on-month terms, following declines since last November. The main drivers were higher food and energy prices. Core inflation was largely unchanged.”