China's factory gate prices rose at the fastest rate in three and a half years in April as the world's second-largest economy gathers momentum after strong first-quarter growth, but economists downplayed the risks to inflation.
Investors globally are increasingly worried that pandemic-driven stimulus measures could spark a rapid rise in inflation and force central banks to raise interest rates and take other tightening measures, potentially holding back economic recovery.
China's producer price index (PPI), a gauge of industrial profitability, rose 6.8% in April from a year earlier, the National Bureau of Statistics said, faster than a 6.5% rise tipped by a Reuters poll of analysts and a 4.4% rise in March.
However, the consumer price index (CPI) rose by a mild 0.9% on year, held down by weaker food prices, and analysts said the rising costs from soaring producer prices were unlikely to be fully passed on to consumers.
"We still expect much of the recent surge in upstream price pressure to prove transitory, with industrial metal prices likely to drop back later this year as a tighter policy stance weighs on construction activity," Capital Economics analysts said in a note.
"We don't think inflation will rise to the point where it triggers a major policy shift" by China's central bank, they added.
Consumers could see some price rises ahead from a global chip shortage affecting goods such as home appliances, cars and computers, said Iris Pang, Greater China chief economist at ING.
"We believe that the chip price increase has already pushed up prices of fridges, washing machines, TVs, laptops and car prices in April, which increased 0.6%-1.0% month-on-month," she said.
Food inflation remained weak. Prices dropped by 0.7% from a year earlier, unchanged from the previous month, weighed by falling pork prices as supply increased.
China's gross domestic product (GDP) expanded by a record 18.3% in annual terms in the first quarter as the country recovers from the devastating impact of COVID-19.
Many economists expect China's GDP growth to exceed 8% in 2021, although some warn that continuing global supply chain disruptions and higher comparison bases will sap some momentum in coming quarters.
Reference: Reuters
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