Energy costs to drive increase in Chinese manufacturing prices

HONG KONG - ANZ Bank is forecasting China's Producer Price Index (PPI), the average increase in selling prices received by Chinese domestic producers of goods and services, to peak at a level of 12% in the fourth quarter of 2021, lifting China's annual PPI for 2021 to 7.5%. Prices are being driven by higher energy prices.

Chinese authorities have agreed to allow electricity prices for industry to rise by as much as 20% -- compared with the current 10% cap -- while rates for residential users will be kept unchanged.

ANZ estimates that this will boost headline PPI by 2% in the near term, but the impact on CPI will be 0.5%, with consumer prices to rise modestly to 2.0% due to low base effects. 

www.research@anz.com  (ATI).