Officials have suggested that China’s recovery is patchy
Soaring commodities prices negatively impacted the performance of Chinese industrial companies during May.
The impact trickled down to the rest of the Chinese economies and is adding to concerns over inflationary pressures.
Profit levels at China’s industrial firms jumped by 36.4% in May year-on-year, according to data from China’s National Bureau of Statistics. The official data showed a slowdown compared to the 57% rise the month before.
It seems that the increasing prices of raw materials are squeezing margins at China’s industrial businesses.
Officials have suggested that China’s recovery is patchy, despite it appearing to be the first out of the blocks as the rest of the world reeled from the coronavirus pandemic.
“The foundation for recovery is not yet solid,” said Zhu Hong, an official at the statistics bureau.
Concerns remain that it is also causing an onset of inflation across the world, amid the ongoing debate among central bankers over raising interest rates.
The Bank of England recently predicted inflation would exceed 3%, which is above its target for a “temporary period”.
However, the news did not motivate the Bank of England to urgently act by tightening its policy.
“The economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back,” the monetary policy committee said.
While US consumer prices rose by the most since 2008 during the month of May as concerns over inflation escalated.
Pent-up demand in the US is facing up to a shortage of goods, from lumber and steel to chemicals and semiconductors, that are used in the manufacturing processes of key goods.
The Fed now expects interest rates to go up in 2023, about 12 months earlier than previous expectations.
While China is the second largest economy on the planet, it remains hugely influential in the functioning of the rest of the world.
Policymakers in China have been doing their best to contain spiralling metals prices, including shifting supplies from the government’s reserves. However, as demand picks up again, the impact of these efforts may not touch the sides.