(Yicai Global) May 11 -- The increase in China’s consumer price inflation last month was consistent with expectations as consumption revives in the post-pandemic country, while factory gate prices soared by the most in more than three years because of the surging cost of raw materials.

The consumer price index, a key inflation measure, rose 0.9 percent in April from a year earlier, its fastest pace since September, the National Bureau of Statistics announced today. The average prediction by chief economists at 23 major financial institutions surveyed by Yicai Global was for a 0.99 percent gain.

A robust upturn in tourism due to the Qingming Festival holiday and China’s success in controlling the coronavirus boosted airline ticket sales, travel agency fees, vehicle rentals and hotel bookings, according to Dong Lijuan, a senior statistician at the NBS.

Higher commodities prices also slightly lifted prices of consumer goods such as electrical appliances and bikes, he said. These factors allowed the CPI to rise despite a 21.4 percent plunge in the cost of pork on the year. 

The producer price index, an indicator of corporate profitability, soared 6.8 percent last month, 2.4 percentage points faster than in March to mark its biggest uptick since October 2017. The economists had predicted a 6.2 percent increase.

Factory gate prices continued to rise due to surging prices of commodities such as iron ore and nonferrous metals, Dong said.

Surveyed before the official data was released, the economists predicted gains in the PPI are unsustainable. Six of those polled expect the gauge to rise in the second quarter, with the pace of growth gradually slowing thereafter.

Producers will not immediately pass on to consumers the higher cost of raw materials, said Wu Ge, chief economist at Changjiang Securities. According to 11 other economists who made inflation forecasts, any gains will be generally under control this year, with an annual increase of just over 3 percent in the CPI. 

Global demand is driving up prices but the increase in crude oil production has been relatively limited, said Wu, adding that prices of copper, tin, iron ore and plastics are at 10-year highs.

China’s export rebates may ease steel supply pressure, but environmental protection measures limit output and the safety inspections are strict, Wu said. The imbalance between supply and demand will drive a further gain in the PPI, he said.

Editor: Tom Litting