By Liangping Gao and Ryan Woo
BEIJING (Reuters) – China’s producer inflation slowed in February to the weakest annual pace in eight months, but analysts expect it to pick up in coming months as global commodities rally challenge measures to support the economy.
The Producer Price Index rose 8.8% year-on-year, the National Bureau of Statistics said in a statement on Wednesday, up from 9.1% in January and compared with expectations in a Reuters poll for a rise of 8.7%.
Many Chinese factories closed in the first half of February due to the Lunar New Year holiday, temporarily holding up demand for raw materials. But the war in Ukraine that began last month has raised concerns about problems in global supply, pushing commodity prices to decades highs.
On a monthly basis, the index rose again after falling in January, with international oil prices rising sharply and raising the costs of domestic fuel-related industries, according to a separate statement from the agency. Local non-ferrous metal prices also rose.
“We project that producer inflation will remain high in the short term as oil and metals prices rise due to geopolitical tensions,” analysts at Goldman Sachs wrote in a note.
China buys more than 70% of its oil and 40% of its gas from abroad, even as the government seeks to increase domestic production.
The Consumer Price Index rose 0.9% year-on-year in February, the data showed, repeating the rate in January and in line with market expectations.
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