The price of goods leaving China’s factories has grown at its fastest pace since the global financial crisis, putting pressure on the country’s leaders as they struggle with a commodity rally.
China’s producer price index rose 9 percent in May, data from the National Bureau of Statistics showed Wednesday, its biggest annual increase since September 2008 and higher than forecast of economists.
The index has been growing strongly in recent months – gaining 6.8 percent April – helped by a low base effect after being in negative territory for most of last year.
The cost of raw materials, which form a central part of China’s PPI, rose sharply last month. NBS data show that prices of the ferrous metal smelting industry increased 38 per cent year-on-year, while those for coal mining increased 30 per cent.
China is strong industrial recovery it has fueled the rally in raw materials but as costs increase, profits are at risk of being squeezed out.
The Chinese government’s economic planning agency warned last month “Excessive speculation” on commodity markets and said it would resort to monopolies and misinformation. Iron ore, which in May touched his the highest level never, fell on the news.
The government has also emphasized the need to prevent spillover in consumer prices, which remain low and have been driven by the volatility of pork prices over the past year. Economists have said the high costs will be the same squeezes the margins of the business, especially for those who sell directly to consumers.
Consumer prices rose 1.3 percent in May, the most since September last year, but fell 0.2 percent a month, the NBS said.