Inflation of industrial inputs in China reached its highest level in 26 years in October, pressured by new outbreaks of Covid-19, rising energy prices, according to official figures released on Wednesday.
The Producer Price Index (PPI) spun up four consecutive months and had an annual variation of 13.5% at the end of October, according to the National Statistics Office (ONE).
“The increase in PPI was due to the combination of imported external factors and local shortages of energy and raw materials,” said ONE principal analyst Dong Lijuan.
They were influenced by the sharp rise in local coal prices, as well as the rise in global oil and gas costs and disruptions in supply chains, explained Rajiv Biswas of the IHS Markit consultancy.
Another recent factor, he added, was the increase in shipping costs around the world “due to the strong rebound in trade flows” between China, the United States and Europe.
In September, the PPI accelerated 10.7%, which was the highest level recorded by the ONE since the mid-1990s.
A period to forget
In China, October was marked by power outages that reduced the activity of its factories.
International prices for natural gas, which is an input to generate electricity, hit record highs during that month. That wreaked havoc in Europe and around the world, but the Chinese government stepped in with a cheaper solution: coal.
Authorities ordered a rapid expansion of some coal mines and the reopening of others for electricity generation. Thus, factories could resume their activities to fulfill their orders on time, especially for the Christmas season.
Some analysts are skeptical about the performance of the Asian giant’s economy due to this and other factors such as the re-emergence of Covid-19 cases that have generated new confinements.
In early November, the government advised the population to store basic necessities, which was interpreted by many as a sign of a potential shortage of products.
JP Morgan cut its growth forecast for the Asian country for the fifth time since August to 4.0% in the fourth quarter of the year from a previous expectation of 5.0 percent.
The institution cited the impact of energy shortages and the reappearance of Covid-19 cases that affect consumer spending and services, so it now expects growth for all of 2021 of 7.8%, from 8.3% it expected in October.
Before JP Morgan, Bank of America also lowered its GDP growth forecast for this year to 7.7 from 8.0 percent.
In the third quarter of 2021, China grew 4.9% annually. The figure was well below 7.9% in the second quarter of this year and 18.3% in the first quarter.
Despite all the headwinds, the country’s trade data was more positive than expected in the tenth month of the year.
According to the statistics of the customs authorities, exports in October grew 27.1% in its annual comparison to 300,200 million dollars.
Evergrande, at risk of default
Another concern continues to be the real estate sector, which is a mainstay of the Chinese economy.
Evergrande, the largest developer in that country, is on the verge of default with a debt of more than 300,000 million dollars, of which 19,000 million are international bonds, according to Reuters.
The company has not defaulted on its debt obligations abroad, but a 30-day grace period for the payment of coupons for more than 148 million dollars in April 2022, 2023 and 2024 bonds ended yesterday.
Some sources with knowledge of the matter told Reuters that some bondholders had not received their payment by the end of the Asian business day.
Reference-www.eleconomista.com.mx