China’s factory gate price inflation reached a 13-year high in August mainly because of rising raw material prices.
The producer price index rose 9.5% year-on-year in August, according to data released by the National Bureau of Statistics of China (NBS) on Thursday. Meanwhile, consumer price index (CPI) rose at a much softer pace of 0.8% year-on-year.
In a Chinese-language statement, Dong Lijuan, urban senior statistician at NBS, said that the factory gate prices were affected by the rising prices of coal, chemicals and steel products.
Profit growth slows
The rising raw material prices had already started affecting industrial profits in China from July. Official data released at the end of August show that industrial profits grew at the slowest pace in seven months during July.
China also imported more commodities which added to the inflation pressure. According to recent data from the country’s General Administration of Customs, China’s iron ore imports rose 10.2% month-on-month in August, while coal and lignite imports rose 35% year-on-year.
However, according to experts the pressure on factory gate prices should ease soon.
Upward pressures easing
“Producer price inflation reached its highest since August 2008 last month due to the rally in global commodity prices. But the breakdown suggests that upward pressure on the factory-gate prices of consumer goods is easing,” Julian Evans-Pritchard, senior China economist at Capital Economics said in a note.
He added that the continued decline in food prices “dragged consumer price inflation back” below 1%.
Evans-Pritchard added that factory gate price inflation is likely to “ease before long” while the CPI will remain muted in 2021.