Business | Markets
China factory-gate inflation at three-year peak
Consumer prices could stay worryingly high after rising oil and metal costs push the producer index up to 8.1%.
- Reuters
- Published: 23:56 May 9, 2008
Beijing: China's factory-gate inflation edged up to 8.1 per cent in April, the fastest rate since late 2004, showing a sustained build-up in price pressures that could keep consumer inflation worryingly high.
The reading on the producer price index was below market expectations of 8.4 per cent but was up from eight per cent in March as food, energy and raw material costs all rose at a double-digit pace.
"Usually it takes about six months for producer price pressure to be transmitted to consumer prices. But now the time lag is getting shorter," said Tang Jianwei, an analyst at Bank of Communications in Shanghai.
"The surge in PPI is mainly due to rises in prices for oil and metals," Tang said. "That means price pressures in the second half will be higher than the market expects."
Consumer price inflation is already stuck at its highest level in more than 11 years.
The consumer price index for April is due to be released on Monday. Sources said it is likely to have risen to 8.5 per cent from 8.3 per cent in the year to March .
Vice-Premier Wang Qishan yesterday labelled inflation as China's biggest economic problem and reaffirmed that the government would stick to a tight monetary policy.
Despite the surge in inflation, the central bank has not raised interest rates since December and has applied the brakes to the yuan's rise since the currency climbed 4.2 per cent against the dollar in the first quarter.
Central bank governor Zhou Xiaochuan said while China needed to protect itself from turbulence in the global economy, it understood that it should also consider the interests of the international community.
"On the one hand we have to maintain healthy and rapid economic development at home, while on the other hand we should shoulder our responsibility in maintaining world economic stability," he said.
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