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Surging global oil and gas prices due to the Russian invasion of Ukraine are adding to inflation risks in China as factory costs remain elevated.
The producer price index rose 8.8% from a year earlier, official data showed Wednesday, down from 9.1% in January and slightly above the median estimate of an 8.6% increase in a Bloomberg survey of economists. Consumer-price growth was unchanged at 0.9%, the same as economists projected.
China only recently managed to tame surging factory prices as global supply constraints eased and the government took steps to curb commodity costs. The recent spike in global energy prices is putting renewed pressure on Chinese manufacturers, threatening to push up costs again, squeeze profits and slow economic growth further.
“As February data does not factor in the recent surging commodities and energy prices, we see more upside pressures to PPI inflation in coming months,” said Liu Peiqian, chief China economist at NatWest Group Plc. “Subdued core inflationary trend suggests that domestic demand recovery is still soft and unstable.”
The Bloomberg producer price tracker rose faster this month after slowing for three months. The data provides an advance estimate for PPI based on the prices of various commodities.
What Bloomberg's Economists say...
The moderation in China's factory-gate inflation and subdued consumer price inflation in February leave the window open for the central bank to extend its easing -- for now. But a 0.5% month-on-month gain in producer prices -- the first rise since November -- points to strong pressure to the upside, which will only intensify with commodity prices rocketing on the Russia-Ukraine war.
-- Eric Zhu, economist
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Consumer inflation remained muted, mainly due to a further drop in pork prices. Excluding pork, consumer prices rose 1.9%. Core inflation, which doesn't include volatile energy and food prices, slowed to 1.1% after remaining unchanged at 1.2% for three straight months.
Consumer prices rose slightly from January due to the Lunar New Year and fluctuations in international energy prices but was generally stable compared with the same period last year, Dong Lijuan, senior statistician at the National Bureau of Statistics, said in a statement. Producer prices rose from January due to the rising cost of international commodities such as crude oil and non-ferrous metals, she wrote.
China is targeting full-year inflation of around 3%, a goal the state economic planner said authorities are capable and confident of achieving. The government set an ambitious economic growth target of around 5.5% for the year and signaled stronger fiscal stimulus is under way, which could drive the prices of raw materials higher.
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