China's producer inflation picked up for the first time in seven months in April, bolstered by surging commodities prices and suggesting its industrial demand remains resilient even as trade tensions ratchet up with the United States. But consumer inflation eased from the previous month as food prices rose at a slower pace, official data showed on Thursday.
Analysts and investors are closely watching inflation gauges in China for signs of a long-expected economic slowdown that would weigh on industrial profit growth and investment and possibly tip a shift in central bank policy. But the country's commodity futures markets are notoriously speculative, making it difficult to tell if producer price swings are pointing to a real change in underlying demand.
The producer price index (PPI) rose 3.4 percent in April from a year ago, accelerating from a 17-month low of 3.1 percent in March, the National Bureau of Statistics (NBS) said on Thursday. On a month-on-month basis, it declined 0.2 percent. Analysts polled by Reuters had expected producer inflation would rebound to 3.5 percent as steel mills stocked up on raw materials such as iron ore and coking coal to meet a seasonal surge in construction. Oil prices have also been on the rise.
Sharper factory-gate price rises could bolster profits for industrial firms, which saw earnings growth slow to the weakest pace in over a year in March. The consumer price index (CPI) rose 1.8 percent from a year earlier, just below expectations and slowing from March's 2.1 percent. On a month-on-month basis, it dipped 0.2 percent.
The core consumer price index, which strips out volatile food and energy prices, rose 2.0 percent in April, unchanged from March. The food price index rose 0.7 percent on-year, after rising 2.1 percent in March, as distortions from the long Lunar New Year holiday receded. Non-food prices rose 2.1 percent, the same pace as the previous month.
Pork prices in April declined 16.1 percent on-year, most likely due to a glut in the market. China has set an inflation goal of 3 percent for 2018, the same target as last year. Most market watchers expect full-year CPI to be in the low- to mid-2 percent range, picking up from 2017 but still well within the central bank's comfort zone.
Mild inflationary pressures had been expected to give Chinese policymakers plenty of room to continue their crackdown on riskier lending this year, which has been pushing up companies' financing costs. But China's central bank last month cut reserve requirement ratios (RRR) for most banks, sparking fears that economic momentum may already be starting to slow.
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