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Friday, December 9, 2016, 12:44

China Nov producer prices at 5-year high

By Agencies

BEIJING - China's November producer prices rose 3.3 percent from a year ago, the highest since October 2011, thanks to soaring prices for commodities such as coal and steel .

The producer price index (PPI) had been expected to rise 2.2 percent on-year, compared with the previous month's rise of 1.2 percent.

On a month-to-month basis, it increased 1.5 percent. Factors including rising prices of coal and steel might lead to continuous rises in PPI, analysts pointed out.

The PPI figures came along with the release of the consumer price index, which rose 2.3 percent year on year in November, and gained 0.1 percent on a monthly basis.

At the same time, China's consumer price index, a main gauge of inflation, grew 2.3 percent year on year in November

At the same time, China's consumer price index (CPI), a main gauge of inflation, grew 2.3 percent year on year in November, up from October's 2.1 percent, the National Bureau of Statistics announced Friday.

On a month-on-month basis, the CPI rose 0.1 percent in November.

NBS statistician Sheng Guoqing attributed the stronger growth of inflation to higher food and fuel prices.

Vegetable prices jumped 5.5 percent month on month, as a cold weather front disrupted supplies, contributing 0.14 percentage points to the CPI growth.

On a year-on-year basis, vegetable prices soared 15.8 percent, compared with 13-percent increase in October.

Prices of petrol, diesel, gas, coal, water and electricity also increased last month, again due to the cold weather.

However, prices of fruit and pork continued to fall from October, down 2.2 percent and 1.9 percent.

In addition, tourism costs including flight prices dipped, as the winter is a low season for travel.

Since January 2016, CPI has been calculated using a new comparison base and included more products and services, while slightly reducing the weighting of food.

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A construction boom led by higher government spending and a blistering housing market rally have boosted prices for materials from steel and copper to glass and cement, with speculators adding fuel to a months-long rally in China's commodity futures markets.

Government efforts to reduce excess capacity in industrial and mining sectors have also buoyed prices by creating shortages in some areas, such as coal.

Industrial profit growth picked up speed in October, rising 9.8 percent from a year earlier.

READ MORE: Central government targets to boost SOEs' profitability

But government officials and some analysts have warned that the gains have been overly reliant on rising prices and may not confirm a sustained increase in real demand. They have also appeared to benefit "old economy" heavy industries more than other parts of the economy.

Economists at ANZ estimate that higher prices of metals, mainly steel, and coal account for nearly half of the PPI changes.

But they maintain the broader-based producer price index still has a higher correlation with economic activity and interest rates than consumer prices, which are primarily driven by food prices and underestimate housing costs.

Though factories have been largely able to pass on higher production costs by raising prices of their goods, analysts do not expect the trend to pose immediate challenges for the central bank as it will take some time to filter through to consumer infltion.

November's consumer inflation was again buoyed by a jump in food prices compared with same period last year, which rose 4 percent.

Non-food prices inched up 1.8 percent versus October's 1.7 percent.

More upbeat producer and consumer inflation data reinforce views that the central bank will be in no rush to loosen monetary policy any time soon. China's central bank has not adjusted interest rates since October 2015, when worries about deflation were more predominant.

The central bank said in its third-quarter monetary policy implementation report it will maintain ample liquidity in the financial system while taking steps to prevent asset bubbles in an increasingly leveraged economy.

China's economy expanded at a steady 6.7 percent in the third quarter and looks set to hit Beijing's full-year target, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.

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