China Economy

China's February factory prices grow at fastest pace since 2018 as exports rise

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Key Points
  • China's factory gate prices rose at the fastest pace since November 2018 in February as manufacturers raced to fill export orders, raising expectations for robust growth in the world's second-largest economy in 2021.
  • The producer price index (PPI) rose 1.7% from a year earlier, National Bureau of Statistics data showed on Wednesday, compared with the median forecast for a 1.5% rise from a Reuters poll of analysts and speeding up from a 0.3% pickup in January.
  • The firmer-than-expected price data is in part driven by a very low base a year earlier but also comes as the specter of surging inflation globally rattles financial markets amid concerns the world economic recovery may overheat.
ZHEJIANG, CHINA - JULY 23: (CHINA MAINLAND OUT)Smelting copper in a factory in Zhejiang, China.
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China's factory gate prices rose at the fastest pace since November 2018 in February as manufacturers raced to fill export orders, raising expectations for robust growth in the world's second-largest economy in 2021.

The producer price index (PPI) rose 1.7% from a year earlier, National Bureau of Statistics data showed on Wednesday, compared with the median forecast for a 1.5% rise from a Reuters poll of analysts and speeding up from a 0.3% pickup in January.

The firmer-than-expected price data is in part driven by a very low base a year earlier but also comes as the specter of surging inflation globally rattles financial markets amid concerns the world economic recovery may overheat.

China's exports in February grew at a record 154.9% in dollar terms from a year earlier, when the country was in a virtual shutdown during the height of the Covid-19 pandemic.

Beijing last week set an economic growth target of above 6% for 2021, which is modest when compared with analyst expectations for an expansion of more than 8%. China's gross domestic product rose 2.3% in 2020, its weakest growth in 44 years but stronger than its global peers.

Chinese officials continue to warn of difficult external conditions, however, as the pandemic remains severe in other parts of the world and saps demand.

The consumer price index fell 0.2% from a year earlier, the statistics bureau said in a separate statement, compared with a 0.4% fall tipped by a Reuters poll and a 0.3% decline in January.

"We do not think the recent period of consumer price deflation is likely to persist. Shifting pork price base effects will nudge up food inflation, a tightening labour market will push up core inflation and energy inflation will rebound thanks to rising oil prices," said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note.

"Given that officials have signalled a hawkish tilt in recent weeks, we think the People's Bank of China will tighten policy this year," he said.