May PPI eases on softening prices of raw materials
BEIJING: China’s producer price inflation eased for the third straight month last month on tumbling prices of raw materials, signalling a broader cooling in economic activity as profits are squeezed by slackening domestic demand and rising financing costs.
Moderating factory gate inflation in the world’s secondbiggest economy could be a further worry for global central banks like the United States Federal Reserve and European Central Bank (ECB), which are puzzling over why domestic prices have remained sluggish despite improving economic growth.
China’s producer price index (PPI) rose 5.5 per cent last month from a year earlier, the National Bureau of Statistics said yesterday, slower than the 6.4 per cent increase in April.
A renaissance in China’s steel industry has been a major driver of the world’s second-largest economy in recent quarters, helping to generate the strongest profit growth in years and adding to a reflationary pulse across the global manufacturing sector.
Now, however, the opposite may be true, as cooling factory gate prices in China appear to be filtering through to benign inflation readings in the US and Europe.
Analysts are also worried that market demand won’t be strong
enough to absorb the surging supplies of steel from the world’s top producer.
Factory gate prices had only turned positive on a year-on-year basis last September, after falling for nearly five years, leaving many industrial firms saddled
with idle capacity and less cash flow to service their debts.
Meanwhile, the consumer price index rose 1.5 per cent last month from a year earlier, accelerating from April’s 1.2 per cent increase, and in line with market expectations. Reuters