Wednesday, September 22, 2021

Surge in China’s factory-gate prices adds to inflation worries

China’s factory-gate prices jumped by the most in 3½ years in April, driven by surging commodities prices, raising concerns that inflationary pressures could spread globally.

The country’s consumer-price index, a measure of inflation that tracks prices for a basket of goods and services, rose 0.9% in April from a year earlier, reaching a seven-month high. The producer-price index, a gauge of factory-gate prices, rose 6.8% last month, the fastest pace since October 2017, China’s National Bureau of Statistics said Tuesday.

The producer figure was higher than the median forecast of 6.5% among economists polled by The Wall Street Journal. The consumer number is in line with expectations.

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A prolonged disruption in global supply chains and the resurgence of Covid-19 in some emerging markets fueled commodities prices’ climb. That in turn pinched profit margins for Chinese producers, who gained share in global exports during the pandemic and saw overseas demand continue to boom this year.

“If the bargaining power of Chinese producers is strong, there is a certain possibility that the rise in Chinese product prices will spill over onto global inflation,” said Zhang Ning, an economist at UBS.

An index of import prices of goods from China to the U.S. has climbed since the start of the pandemic and rose to the highest level since December 2018 as of March, according to the U.S. Bureau of Labor Statistics.

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Many economists expect China’s producer-price index to continue to climb through the second quarter before moderating in the second half of this year, as supply shortages may persist in the near term. Robust demand for consumer goods, disruption of mining operations in countries such as South Africa and global shipping delays could boost the rally in some commodities.

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