Workers check rolls of sheet aluminum at a factory in Wuhan, China.
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BEIJING — China’s producer price index rose 9% in May from a year ago as commodity prices surged, the National Bureau of Statistics said Wednesday.
That marked the fastest increase in production costs since September 2008, when the index rose 9.13%, according to Wind Information.
While the gains surpassed expectations of an 8.5% increase, according to a Reuters poll, the rise does come off a low base. The index fell 3.7% in May 2020 during the initial months of the coronavirus pandemic.
Rising raw material prices are a particular concern for companies in the building materials business, as well as iron and steel, said Gan Jie, a professor of finance and academic director for MBA programs at the Beijing-based Cheung Kong Graduate School of Business.
“These companies are more pessimistic. They see a very sharp rise in costs, and they think it’s going to run until the end of the year,” she said Wednesday, noting other businesses expected prices would normalize sooner. That’s based on her team’s follow-up in the last week on a survey of more than 2,000 Chinese companies in the industrial sector.
The initial survey conducted in late March and April found business sentiment remained unchanged in the first quarter compared with the prior quarter. However, the study found the proportion of companies reporting gross profit margin below 15% has increased to about 70%.
“They are certainly being squeezed,” Gan said. “A few companies even said they cannot accept orders right now, because the more they produce, the more they are losing money. Their net profit is in the negative numbers.”