China's factory inflation hits 6-month low on government curbs

BEIJING (Reuters) – China’s factory-gate inflation cooled to its slowest pace in six months in January, official data showed on Wednesday, as government measures to control surging raw material costs weighed on producer prices.

The producer price index (PPI) increased 9.1% from a year ago, the data showed, slower than the 9.5% growth tipped by a Reuters poll and a 10.3% gain in December，the National Bureau of Statistics (NBS) said in a statement. It was the weakest pace since July.

Consumer price inflation also slowed year-on-year in January, the data showed.

The world’s second-biggest economy faces multiple headwinds, weighed down by persistent weakness in the property sector and strict anti-coronavirus measures that have sapped consumer confidence and spending.

But steady falls in factory-gate price inflation from October’s 26-year high have provided a buffer to downstream firms struggling with high raw material costs and supply shocks.

Globally, inflation is likely to persist for some time, but China’s ability to cope with abnormal price fluctuations has improved, the country’s state planner said earlier this month.

The supply of energy sources such as coal, oil and gas will be “guaranteed”, the National Development and Reform Commission (NDRC) said, noting it expects producer price inflation to slow further this year while consumer price inflation picks up.

China’s consumer price index (CPI) inched up 0.9% last month from a year earlier. Economists in a Reuters poll had expected a 1% rise, after a 1.5% uptick in December.

Analysts believe cooling inflation could provide room for the central bank to ease policy to support the slowing economy.

China’s central bank has cut interest rates and pumped more cash into the financial system to lower borrowing costs, with more easing steps expected.

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