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The price of goods leaving China’s factories has risen at its fastest pace since the global financial crisis, accumulating pressure on the country’s leaders as they face a concentration of commodities.
China’s output price index added 9% in May, according to data from the National Bureau of Statistics, its biggest year-on-year increase since September 2008 and higher than economists forecast.
The index has risen sharply in recent months – gaining 6.8 percent in April, helped by a low base effect after having been in negative territory most of last year.
The cost of raw materials, which are a key part of China’s PPI, rose sharply last month. NBS data showed that prices in the ferrous smelting industry rose 38% year-on-year, while those in coal mining added 30%.
China is strong industrial recovery it has caused the rise in raw materials, but as costs increase, profits run the risk of being compressed.
The Chinese government’s economic planning agency warned last month “Excessive speculation” in commodity markets and said it would repress monopolies and false information. Iron ore, which reached its peak in May highest level never, fell in the news.
The government has also stressed the need to avoid the loss of consumer prices, which remain low and have been driven by the volatility of pork prices over the past year. Economists have said the costs will be high squeeze business margins, especially for those who sell directly to consumers.
Consumer prices rose 1.3% in May, the most since September last year, but fell 0.2% monthly, the SNB said.
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