Price surge good news for world economy

CHINA’S producer prices rose at the fastest pace in more than five years in November as prices of coal, steel and other building materials soared, boosting industrial profits and giving firms more cash flow to pay off mountains of debt.

The stronger-than-expected 3.3 percent surge in prices, along with upbeat factory readings from China, the US and Europe, add to views that the global economy may be slowly reflating again, thanks to a pick-up in industrial activity.

“The PPI jump confirms our view that China has emerged from a multi-year deflationary trap,” ANZ said in a note.

While some heavy industries such as coal mining, steel mills and metal processors saw the biggest rebound, official data on Friday showed the price recovery was also becoming more broad-based, with more sectors emerging from deflation.

Consumer inflation also picked up more than expected to 2.3 percent from a year earlier, the highest since April, due to higher food prices.

Though the price gains were modest, they reinforced views that the central bank will be in no rush to loosen monetary policy again any time soon. – Reuters