China's Producer Price Index Soars 9% in July After Two Months (Comprehensive)

Exceeding Forecast at 8.8%
CPI Also at 1%... Surpassing Expectations

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] China's Producer Price Index (PPI) inflation rate hit 9% again two months after reaching the highest level in 13 years at 9% in May. Analysts suggest that the sustained rise in international commodity prices is keeping China's PPI inflation rate at a high level. The sharp increase in producer prices in China, known as the "world's factory," is drawing attention as it could trigger global inflation.

On the 9th, China's National Bureau of Statistics announced that the PPI in July rose 9% year-on-year, exceeding the forecast of 8.8%. Additionally, the Consumer Price Index (CPI) rose 1% year-on-year, surpassing the expected 0.8%.

Previously, in May, China recorded a PPI inflation rate of 9%, the highest since May 2008. An increase in the PPI means that the prices of goods produced in factories have risen, which directly affects consumer prices.

After recording an 8.8% increase in June, the rate rose back to 9% last month.

The sustained rise in China's PPI inflation rate is attributed to significant increases in international raw material prices such as crude oil, iron ore, and non-ferrous metals since May, along with rising domestic industrial product prices.

With the PPI soaring like this, Chinese authorities have become alarmed. They are concerned about the possibility of a deterioration in China's real economy, as rising raw material prices reduce the profitability of Chinese manufacturing companies.

Accordingly, measures announced last month by Chinese financial authorities?including cuts in reserve requirement ratios and fees, as well as reductions in long-term deposit interest rates following changes in interest rate calculation methods?are analyzed as responses reflecting the real economy situation.

The World Bank (WB) stated, "Inflation is expected to continue globally this year as the global economic recovery trend rapidly responds," and added, "High inflation may pose challenges to the policy choices of emerging and developing countries that are pursuing expansionary policies for economic recovery."

In particular, the rise in China's PPI could also affect the CPI, potentially causing inflation that would impact not only China but also global prices.

This content was produced with the assistance of AI translation services.