China's July factory price growth quickens, adds to business cost pressures

BEIJING (Reuters) – China’s factory gate prices in July rose at a faster clip from the previous month and exceeded analyst expectations, adding to pressure on businesses struggling with high raw material costs, while consumer inflation eased slightly.

FILE PHOTO: A worker works at Xunxi factory, which is an affiliate of Chinese e-commerce giant Alibaba, during a media tour, in Hangzhou, Zhejiang province, China November 10, 2020. REUTERS/Aly Song/File photo

The producer price index (PPI) grew 9.0% from a year earlier, matching the high seen in May, the National Bureau of Statistics (NBS) said in a statement on Monday. Analysts in a Reuters poll had expected the PPI to rise 8.8%, unchanged from June.

China’s economy has largely recovered from disruptions caused by the COVID-19 pandemic, but the expansion is losing steam as businesses face intensifying strains from higher commodity prices and global supply chain bottlenecks.

The global spread of the more-infectious Delta variant of the virus and new outbreaks of cases at home, on top of recent heavy rainfall and floods in some Chinese provinces have also disrupted economic activity.

The PPI, a benchmark gauge of a country’s industrial profitability, inched up 0.5% on a monthly basis, accelerating from a 0.3% uptick in June.

China, as the top steel consumer of both coal and iron ore, has stepped up efforts to tame rising commodity prices that have squeezed manufacturers’ margins, including stepping up inspections on trading platforms and releasing state reserves.

Dalian iron ore was on track to end July with a monthly loss of around 10%, the steepest since February 2020.

A separate NBS statement showed that the consumer price index (CPI) in July rose 1.0% from a year earlier, compared with a 1.1% gain in June and below the government target of around 3% this year.

The index was expected to inch up by 0.8%, according to a median forecast in a Reuters poll.

On a month-on-month basis, the CPI rose 0.3%, compared with a 0.2% increase tipped by Reuters poll and June’s 0.4% decline.

The core consumer price index, which strips out volatile food and energy prices, stood at 1.3% on year, versus a 0.9% rise in June.

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