China’s producer inflation in May at four-month high

BEIJING: China’s producer inflation picked up for the second month in a row to a four-month high in May, buoyed by stronger commodity prices, suggesting the world’s No.2 economy has retained growth momentum despite rocky trade relations with the United States.

Annual consumer inflation held steady in May from the previous month, as food prices remained largely stable, official data also showed on Saturday.

The producer price index (PPI) rose 4.1 per cent in May from a year earlier, bolstered by a recent jump in commodity prices and up from a lower base last year, according to the National Bureau of Statistics (NBS). That compared with an acceleration to 3.4 per cent in April. On a month-on-month basis, the PPI rose 0.4 per cent in May, compared with a 0.2 per cent decline in April.

Analysts polled by Reuters had expected May producer inflation would pick up to 3.9 per cent, and predicted that producer inflation will accelerate again in June as global crude oil prices continue to rise.

Raw material prices jumped 7.4 per cent in May from a year earlier due to healthy demand from the steel sector and an easing of winter pollution curbs. That compared with a 5.7 per cent increase in April.

The higher factory-gate inflation helped to ease concerns of slowing momentum in the economy as the authorities implement tougher pollution controls on “smokestack” industries and cash-strapped regional governments cut back on big investment projects, curbing demand for building materials.

The rise could also provide a lift to earnings. Chinese industrial firms’ profits rose at their fastest pace in six months in April, with earnings for iron and steel processing firms jumping 260 per cent.

The consumer price index (CPI) rose 1.8 per cent from a year earlier, in line with expectations and unchanged from April’s gain of 1.8 per cent.

On a month-on-month basis, the CPI declined 0.2 per cent.

The core consumer price index, which strips out volatile food and energy prices, rose 1.9 per cent in May, down from 2.0 per cent in April.

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