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China’s producer prices rise at quickest rate since financial crisis

China’s producer index added 9% in May

The price of goods leaving China’s factories, or ‘China’s factory gate prices’, has risen at the quickest rate in over 12 years, as a result of surging global commodity prices.

It is drawing attention to inflationary pressures while policymakers are trying to stimulate their economies in the aftermath of a coronavirus-induced downturn.

China’s producer index added 9% last month, data from the National Bureau of Statistics revealed on Wednesday. The figure surpassed economists’ forecasts and is the biggest year-on-year jump since the 2008 financial crisis.

Analysts who took part in a Reuters poll expected the PPI to rise 8.5% after a 6.8% jump in April.

The measure’s sharp rise in recent months has been driven by a worldwide rally in commodities, in addition to a low base having seen falls through much of 2020.

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China’s rising costs of production could ring the alarm bells for US and others around the world amid ongoing concerns over the levels of inflation.

“The worry is PPI may hover at an elevated level for an extended period of time, which would create economic headaches if mid- or downstream firms fail to absorb higher costs,” Nie Wen, chief economist at Hwabao Trust, told Reuters.

The news comes as eyes will turn to the US inflation reading on Thursday, as investors are growing concerned that the Fed may be forced to start reigning in its stimulus.

US Senate Bill

The US Senate voted, by 68-32, to approve new legislation aimed at boosting the country’s ability to compete with China on thee technological front.

The measured passed on Tuesday and allows for around $190bn of provisions to bolster US tech and research.

Senate Majority Leader Chuck Schumer, a co-sponsor of the measure, warned against the dire consequences of not funding research to keep apace with China.

“If we do nothing, our days as the dominant superpower may be ending. We don’t mean to let those days end on our watch. We don’t mean to see America become a middling nation in this century,” Schumer said.

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