China producer price reflation moderates as commodities cool off

Bloomberg

China’s producer prices surged again at close to the quickest pace since 2008 last month, though pulled back slightly from February, suggesting the reflationary boon to industrial profits is set to moderate.
Producer price index rose 7.6 percent from a year earlier, versus median estimate of 7.5 percent in Bloomberg survey and 7.8 percent increase in February. Consumer price index rose 0.9 percent in March, versus 0.8 percent gain in February, the National Bureau of Statistics said on Wednesday.
The revival in China’s producer prices — driven in part by higher commodity prices and a pick up in industrial activity — has helped fuel the world’s shift away from deflationary pressures. The rebound aided company profits while providing the government respite to rein in borrowing, tighten monetary policy, and cool a frenzy of speculation in the housing market. PPI gains are forecast to moderate in coming quarters as low year-earlier figures fall away.
“March price data add to the impression of steady growth and moderate inflation,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. “The PBOC’s efforts to edge rates higher reflect concerns about leverage and yuan weakness. At this point, inflation remains a secondary consideration.”
“It looks like there’s a lot of inflation momentum at the producer level, which is good because they’ll have higher profits and more money to invest,” Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole SA in Hong Kong, said in a Bloomberg Television interview.