Prices charged by factories in China have risen at the steepest rate for more than three years, sparking inflation fears across the globe.
Data from China’s National Bureau of Statistics revealed that the producer price index jumped 6.8% in the year to April, up from 4.4% the previous month.
The scale of the price increases also outstripped the 6.5% that had been predicted by analysts.
The increase in factory gate inflation was driven by a spike in commodity prices – the cost of raw materials increased 15% in the year to April.
Such an increase in prices is likely to result in higher sourcing costs for retailers, creating a fresh dilemma as the sector bids to bounce back from the coronavirus crisis – whether to absorb such costs, or pass them on to customers.
Although the consumer price index (CPI) rose 0.9% last month, up from 0.4% in March, that remained below forecasts of a 1% rise. The increase was driven by non-food prices.
Increased inflationary pressure could force central banks ro raise interest rates, which would slow the economic recovery.
And concerns have already hit global stock markets, with the FTSE, Nasdaq, Tokyo’s Nikkei 225 and the Hang Seng in Hong Kong all falling this week.
Lead economist at Oxford Economics Stephen Foreman said: “We project global producer price inflation will experience a spike this year, especially in emerging markets and the US. But it won’t persist.
“The return to more normal economic activity, an easing of supply-side pressures and structural downward forces will keep a lid on the medium-term producer price outlook.”
No comments yet