Producer prices hit more than 3-year high

By Wang Yanlin  |   2008-6-11  |     ONLINE EDITION

CHINA'S producer prices reached a more than three-year high last month, said the National Bureau of Statistics today.

Boosted by rising energy and raw material costs, the Producer Price Index, the main gauge of factory-gate inflation, surged 8.2 percent last month from a year earlier.

It accelerated from 8.1 percent in April and was the highest since a 8.4-percent hike in October 2004.

"The fast expanding PPI was expected as global prices of oil and other basic commodities are on the rise," said Li Maoyu, an analyst with Changjiang Securities Co. "It would have expanded faster if not for government control of retail oil prices."

Crude oil prices climbed 30.9 percent in May as global oil prices jumped to around US$133 a barrel. But the growth was less than the 37.9 percent increase in April due to price control policies.

The costs for raw coal and ordinary large rolled steel also gained 24.1 percent and 27.2 percent respectively.

For the first five months this year, producer prices have risen 7.4 percent compared to a year earlier.

However, despite the rising PPI, analysts said consumer prices will likely drop below 8 percent due to stable food costs. The Consumer Price Index data for last month will be released tomorrow morning.

Peng Ken, a Citigroup economist, said China's Consumer Price Index may fall to 7.7 percent in May as food prices retreated.

"The data from the Ministry of Commerce indicate that food prices rose about 19 percent from a year ago, down from 22 percent in April. If so, non-food CPI may have picked up to 2 percent from 1.8 percent, suggesting that rising costs are already having a notable effect on non-food prices, which would partially offset softer food prices," said Peng.

He also added that energy's direct weight in the CPI remains low, but the spillover effects could be substantial.