China's factory inflation hits 3yr high in May
Live Events CONSUMER INFLATION FUELLED BY GASOLINE as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can
Live Events CONSUMER INFLATION FUELLED BY GASOLINE as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Beijing: China's producer prices rose for a third straight month in May to the highest since July 2022, while consumer prices stayed elevated as global energy prices piled cost pressures on manufacturers and drove up costs of living for households.Cost pressures from the Iran war could squeeze corporate profits and further subdue domestic consumption, although global AI-related demand provided a boost for some sectors.For manufacturers not in advanced manufacturing, passing higher input prices to consumers could remain difficult, highlighting headwinds policymakers face in their efforts to support the job market and bolster still-soft domestic demand.The producer price index (PPI) rose 3.9% from a year earlier, Bureau of Statistics data showed on Wednesday, above a 3.8% forecast in a Reuters poll and 2.8% rise in April."In industries where demand is solid, such as AI, firms can pass on higher input cost and even charge end consumers a markup," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
That is not the case for industries such as automotives, he said.Stronger demand for computing power contributed to an increase in the PPI, NBS said in a statement, pointing to rising prices in non-ferrous metal smelting and rolling processing and electronic equipment manufacturing sectors.The PPI increased 0.5% month-on-month, less than a 1.7% rise in April.Energy prices have soared since the United States and Israel launched attacks on Iran in late February, and cost pressures are likely to persist as the effective closure of the Strait of Hormuz continues to disrupt oil and gas flows from the Gulf. Resumption of the flows will take time even after the waterway reopens.The energy-induced price shock has helped lift China's producer prices out of a years-long deflationary streak, as the year-on-year PPI reading turned positive in March for the first time since September 2022. Policy efforts to raise prices, including a government campaign to curb corporate price-cutting, had previously only eased deflation.But the mismatch between supply and demand in China's economy may worsen as rising costs of living dampen already lukewarm household appetite for discretionary spending.Consumer prices in May rose 1.2% from a year earlier mainly on rising gasoline, gold jewellery and services prices, according to the statistics bureau.
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