China factory-gate inflation up for fifth straight month

Prices for goods at the factory gate in China expanded for a fifth straight month, the government said Tuesday, in a sign of strengthening demand as the world's second-largest economy stabilises.

The producer price index (PPI) rose 6.9 percent year-on-year in January, according to the National Bureau of Statistics, outstripping an economist estimate of a 6.5 percent increase in a Bloomberg News survey.

Accelerating from the previous month's 5.5 percent, the PPI has been rising since September, when it snapped a four-year streak of declines. 

The sustained recovery has fuelled expectations China could begin exporting inflation into the global economy.

But uncertainty hangs over the outlook due to concerns trade tensions may surge under US president Donald Trump, who has accused China of manipulating its currency and threatened to slap punitive tariffs on its goods.

An increase in global crude prices lifted prices in oil and natural gas exploitation, which contributed to the expansion, NBS analyst Sheng Guoqing said in a statement.

The consumer price index (CPI), a key gauge of retail inflation, rose 2.5 percent year-on-year in January, the data showed, also beating a Bloomberg analysis that forecast a 2.4 percent increase.

The figures were largely affected by the annual Lunar New Year holiday, which caused prices of fruit and vegetables to rise while a surge in travel sent the cost of flights and hotels up, Sheng said.

China is the world's biggest trader in goods, and its performance affects partners from Australia to Zambia, many of which have been mired in tepid inflation for years, which has in turn caused a drag on the global economy.

Looking ahead, both consumer and producer prices are expected to peak soon, as "the base effects that have boosted inflation in recent months are soon going to go into reverse", Julian Evans-Pritchard of Capital Economics said in a note.

Beijing's move to tighten up monetary policy and cool down the retail property market would also "keep broader price pressure contained over the medium-term", he added.

source: AFP