China’s producer prices rose at the fastest pace in five years, easing concerns over slowdown in the world’s second largest economy. The Producer Price Index (PPI) surged 5.5 percent from a year ago in December, the fastest pace since September 2011, according to Chinese government data. Analysts polled by Reuters had expected a 4.5 percent gain.
“The PPI returning to positive is a kind of stabilization that can help industrial profits to improve; that can alleviate some of the liquidity pressure of corporates,” said ANZ’s chief economist for Greater China, Raymond Yeung.
A weaker currency and higher raw materials prices boosted the producer prices, the National Bureau of Statistics said in a statement. The yuan depreciated 6.5 percent against the U.S. dollar last year, making imported commodity prices more expensive. Also, the demand for industrial products recovered.
“High commodity prices will delay the government effort to deal with over capacity,” said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “Producers are tempted to fire the engine again.”