China: Factory prices snap year-long decline as demand recovers
China: Factory prices snap year-long decline as demand recovers
Author: CSEBA / SEEbiz / Reuters
10th February 2021
BEIJING - China’s factory gate prices rose in annual terms in January for the first time in a year, as months of strong manufacturing growth in the world’s second-largest economy pushed raw material costs higher.

The producer price index (PPI) rose 0.3% from a year earlier, the National Bureau of Statistics (NBS) said in a statement, the fastest pace of increase since May 2019 but slightly lagging a 0.4% gain tipped by a Reuters poll of analysts. PPI declined 0.4% in December.

Consumer prices, however, unexpectedly slipped into deflation in January, the first time upstream prices have risen faster than downstream costs in more than two years.

China’s return to factory-gate inflation was driven by increases in upstream raw materials, said Betty Wang, an analyst at ANZ. Over the next months PPI “may extend the uptrend and rise positively,” she said.

The country’s factories staged a stunning export-driven recovery in 2020 thanks to hot global demand for home electronics and anti-epidemic goods, and as other manufacturing economies struggled with COVID-19 lockdowns.

The economy is expected to grow 8.4% this year, following a 2.3% rise in 2020 in the wake of the COVID-19 pandemic that forced the country to shut down for much of the March quarter last year.

But a resurgence of the virus last month, though mostly isolated to the northeastern provinces, raised concerns about temporary disruptions to production.

Some regional authorities rolled out tough measures including home quarantines and travel curbs to contain what was the country’s worst outbreak since March 2020. Numbers of new domestically transmitted cases fell sharply by early February.

China’s factory activity grew at the slowest pace in five months in January, official data showed last week, reflecting the outbreak’s impact on production and transportation as the country sought to contain COVID-19 ahead of the Lunar New Year holidays.

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