China factory gate inflation snaps five month drop in April

Consumer prices fell in April but analysts warned a trade war with the US could put upward pressure on Chinese inflation
AFP

Beijing (AFP) – Chinese factory gate prices rose in April to snap five months of falling, data showed Thursday, but analysts said the downtrend would likely continue as government anti-pollution measures are lifted.

Inflation hit a nine-year high in 2017 on restrictions of heavy industry production by authorities to curb air pollution during the winter months, as well as state efforts to slash excess industrial capacity.

But the producer price index — a key barometer of the industrial sector — has been easing since the end of last year as those controls are tempered.

Official data Thursday showed the PPI hit 3.4 percent in April, up from 3.1 percent in March, in line with a forecast by economists surveyed by Bloomberg News.

However, Julian Evans-Pritchard of Capital Economics wrote in a research note that the lifting of anti-pollution measures — which had crimped supplies of various products — was still weighing on prices of industrial goods.

The consumer price index — the key gauge of retail inflation — eased to 1.8 percent from 2.1 percent in March, and slightly short of the 1.9 percent forecast and well off the government target of “around three percent”.

Pork prices dropped 16.1 percent year-on-year, dragging down the consumer price inflation, Sheng said.

But threats of a trade war between the United States and China could stoke prices, Evans-Pritchard said.

“Looking ahead, possible restrictions on imports of soybeans and pork from the US pose some upside risk to food inflation,” he wrote.

And Zhu Qibing, chief macro-economy analyst at BOC International China in Beijing, added: “Inflation pressure will pick up in coming months, but won’t rise to the level that would affect monetary policy.”

— Bloomberg News contributed to this story —

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