China factory inflation up on rising commodity prices


BEIJING • China’s factory inflation accelerated faster than expected in May as the price of commodities such as crude oil and metals increased.

The producer price index (PPI) rose 4.1% from a year earlier, compared to a projected 3.9% increase in a Bloomberg survey of economists and a 3.4% gain in April. The consumer price index climbed 1.8% in May, the statistics bureau said on Saturday, matching economists’ forecast and the previous month’s increase.

While accelerating PPI and milder consumer inflation may sustain margins for some of China’s smokestack industries, there’s no sign of a lasting rebound. The producer price gauge is forecast to ease to a 3.3% gain this year from the 6.3% increase last year that helped support global reflation.

“The commodity rally was both due to strong oil prices and stable dome s t ic demand,” said Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd.

“The economy has held up well in the second quarter, but will gradually slow in the second half of this year.”

Prices of products from crude oil and natural gas extractors surged 7.5% in May from a month earlier, while a robust steel market boosted metal prices, the National Bureau of Statistics said in a statement released with the data.

“This provides room for the authorities to clean up the debts of zombie enterprises,” said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd in Hong Kong.