China February producer inflation fastest in nearly nine years as commodities surge

Thu Mar 9, 2017 5:51am EST
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By Sue-Lin Wong

BEIJING (Reuters) - China's producer price inflation accelerated to its fastest pace in nearly nine years in February and by more than expected as prices of steel and other raw materials extended a torrid rally, boosting profits for industrial companies worldwide.

Consumer inflation, however, cooled more than expected to its mildest pace since January 2015 as food prices fell, remaining well below the government's 3 percent target.

China's iron ore and steel prices have been rallying for a year, fueled by a construction boom, though worries are growing over rapidly rising stockpiles at Chinese ports.

The country's insatiable demand for resources has helped spur an inflationary pulse in commodities markets and the manufacturing sector worldwide.

The producer price index (PPI) jumped 7.8 percent in February from a year earlier, slightly more than economists had expected and compared with a 6.9 percent increase in January, the National Statistics Bureau (NSB) said on Thursday.

But many analysts believe China's producer inflation may peak soon, and do not expect much of a flowthrough into China's consumer inflation data, which unlike some other large economies is mainly driven by prices of food and services.

In recent months, the People's Bank of China (PBOC) has cautiously shifted to a tightening bias, inching up short-term money market rates, as authorities turn their focus to containing the risk from a rapid build-up in debt.

Cooling inflationary pressures could reduce the risk that the central bank would have to respond more forcefully.   Continued...

FILE PHOTO: A worker works at a construction site in Shanghai, China March 3, 2017. REUTERS/Aly Song/File Photo