China's Producer Prices Jump in February

Fastest rate of growth in three years

China's producer or wholesale prices rose in February at the fastest rate in over three years, the government said March 10, amid concerns that inflation is becoming more entrenched. The producer price index (PPI) gained 6.6% last month from a year earlier, the National Bureau of Statistics said.

It compared with an increase of 6.1% in January and 6.4% for the two months combined.

A spike in energy and raw material costs as well as severe winter weather that crippled transport networks during the Chinese New Year holiday were in part to blame for the jump in the PPI. Raw materials prices rose 8.8% last month, while prices of crude oil rose 37.5% in February, while the prices of gasoline, kerosene and diesel were up 8.7%, 11.4% and 9.8% respectively.

"Overall, the further uptick in intermediate goods inflation at the PPI level reflects continuous upward cost pressure for a range of commodities, energy resources and raw materials," Grace Ng, an economist at JP Morgan, told clients in a note.

Producer prices are a critical measure of economic trends, because they tend to trickle into consumer prices, which more directly affect China's 1.3 billion consumers.

China's inflation likely hit a new 11-year high of 8.3% last month on the back of rising food prices, according to an estimate provided by the Bank of China, the country's second largest lender.

China's economy, which expanded by 11.4% in 2007, its fifth consecutive year of double-digit growth, kept inflation in check for the first four years but since 2007 prices have rise to decade high levels.

Copyright Agence France-Presse, 2008

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