China factory activity rises but analysts warn of 'fragile recovery'

China factory prices rise as industries recover from pandemic

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Beijing: Official data on Wednesday showed that Chinese factory prices rose at the fastest rate in more than two years in February as the country’s huge industrial sector has recovered from the downturn caused by the coronavirus.

China’s PPI rose in January for the first time in a year, and the PPI in February was the fastest since November 2018.

According to the National Bureau of Statistics, the producer price index (PPI), which measures the cost of goods at the entrance of factories, rose 1.7% last month, exceeding analyst expectations.

Analysts predict that rising global commodity prices will further intensify inflation in the world’s second largest economy in the next few months.

Dong Lijuan, a senior statistician at the National Bureau of Statistics, said that due to the “continuous rise in international crude oil prices”, prices in petroleum-related industries continue to rise.

Dong added that domestic demand has increased and international metal commodity prices have continued to rise, pushing up prices in the metal industry.

Rajiv Biswas, chief economist for IHS Markit Asia Pacific, told AFP: “Due to the rising prices of electronic parts, especially semiconductors, and the rising transportation costs caused by the shortage of containers, the manufacturing input costs Also pushed up.”

On the other hand, consumer prices fell 0.2% in February, slightly lower than analysts’ expectations, partly due to rising food prices.

The price of pork was 14.9% lower than the same period last year. At that time, China’s cattle herd was raging due to African swine fever, and the price of staple food soared.

Julian Evans-Pritchard, senior China economist at Capital Economics, said that the recent consumer price deflation is unlikely to continue. He added that food inflation has fallen. It is due to the changes in the time of the Chinese New Year.

This year, China’s economy is expected to recover strongly. Beijing has set its economic growth target at 6% or more, and analysts expect this figure to be even higher.

Taking into account the government’s 3% growth target for 2021, consumer inflation is also expected to increase.

Nomura’s chief China economist Lu Ting said that the large-scale global launch of vaccines and the implementation of fiscal stimulus plans in many developed economies with low interest rates mean that commodity prices may rise further in the next few months.

Lu warned in a market report: “China is heavily dependent on energy and commodity imports, so the price increase of these products will have a significant impact on China’s inflation, especially PPI inflation.”

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