China's July factory price growth quickens, adds to business cost pressures

BEIJING (REUTERS) – China’s factory gate prices in July rose at a faster clip from the previous month and exceeded analyst expectations, adding to pressure on businesses struggling with high raw material costs, while consumer inflation eased slightly.

The producer price index (PPI) grew 9.0 per cent from a year earlier, matching the high seen in May, the National Bureau of Statistics (NBS) said in a statement on Monday. Analysts in a Reuters poll had expected the PPI to rise 8.8 per cent, unchanged from June.

China’s economy has largely recovered from disruptions caused by the Covid-19 pandemic, but the expansion is losing steam as businesses face intensifying strains from higher commodity prices and global supply chain bottlenecks.

The global spread of the more-infectious Delta variant of the virus and new outbreaks of cases at home, on top of recent heavy rainfall and floods in some Chinese provinces have also disrupted economic activity.

The PPI, a benchmark gauge of a country’s industrial profitability, inched up 0.5 per cent on a monthly basis, accelerating from a 0.3 per cent uptick in June.

China, as the top steel consumer of both coal and iron ore, has stepped up efforts to tame rising commodity prices that have squeezed manufacturers’ margins, including stepping up inspections on trading platforms and releasing state reserves.

Dalian iron ore was on track to end July with a monthly loss of around 10 per cent, the steepest since February 2020.

A separate NBS statement showed that the consumer price index (CPI) in July rose 1.0 per cent from a year earlier, compared with a 1.1 per cent gain in June and below the government target of around 3 per cent this year.

The index was expected to inch up by 0.8 per cent, according to a median forecast in a Reuters poll.

On a month-on-month basis, the CPI rose 0.3 per cent, compared with a 0.2 per cent increase tipped by Reuters poll and June’s 0.4 per cent decline.

The core consumer price index, which strips out volatile food and energy prices, stood at 1.3 per cent on year, versus a 0.9 per cent rise in June.

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