By Gina Lee
Investing.com – China’s factory gate inflation rose to a 13-year high in August. Soaring raw material prices contributed to the gains while exerting further pressure on Chinese manufacturers.
National Bureau of Statistics (NBS) data released earlier in the day showed that the producer price index grew 9.5% year-on-year. The rate was faster than the 9% growth reported during the previous month, which was also the figure in forecasts prepared by Investing.com. It was also the fastest pace of growth since August 2008.
Recent COVID-19 outbreaks, high raw material prices, tighter property curbs and a campaign to reduce carbon emissions have all contributed to the slowdown in China’s economic recovery from COVID-19.
The coal, chemicals and metals industries drove much of the commodity price increases in August, NBS official Dong Lijuan said in a statement released alongside the data.
Meanwhile, the NSB data also said that the consumer price index (CPI) grew 0.1% month-on-month, lower than the 0.5% growth in forecasts prepared by Investing.com and the 0.3% growth reported during the previous month.
The CPI grew 0.8% year-on-year, lower than the 1% growth reported during the previous month and in forecasts prepared by Investing.com.
Consumption was hit by tighter restrictive measures, including travel limits, to curb the latest COVID-19 outbreak. Declines in airfares, travel and hotel room prices thanks to these measures slowed consumer inflation on a monthly basis, said NBS's Dong.
The People's Bank of China is now widely expected to further cut the amount of cash banks must hold as reserves later in 2021. It already cut the amount in July 2021, a move that released around CNY1 trillion ($154.72 billion) in long-term liquidity into the economy.
"We expect monetary policy to remain prudent with a slightly loosening bias for the rest of the year," HSBC senior economist for Greater China Jing Liu said in a note.
China's consumer price inflation, which is likely to stay muted, will not constrain a slight loosening stance, the note added.