(Corrects first paragraph to note producer prices inflation was
highest in more than 5 years, not prices)
* Dec producer prices +5.5 pct y/y, fastest growth since
* Dec consumer prices +2.1 pct
* Improving producer prices feeding into global reflationary
BEIJING, Jan 10 China's producer prices surged
the most in more than five-year highs in December and by more
than expected as prices of coal and other raw materials soared,
while consumer inflation remained subdued.
The pick-up in prices reinforces views that the world's
second-largest economy continues to show signs of stabilisation,
underpinned by stronger factory activity and domestic demand
which is being fueled by a lending and building boom.
The producer price index (PPI) jumped 5.5 percent in
December from a year earlier, the most since September 2011,
compared with a 3.3 percent increase in November, the National
Statistics Bureau said on Tuesday.
Analysts had expected a 4.5 percent gain, a Reuters poll
Raw materials and mining continued to show the fastest
The statistics bureau said volatility in exchange rates was
one reason for the increase in producer prices, as commodity
imports became more expensive.
The yuan weakened 6.5 percent against the dollar last year,
its worst performance since 1994.
Consumer inflation rose 2.1 percent on-year, missing
expectations, as food prices rose at a more modest pace.
Accelerating prices in the Chinese economy are also
contributing to stronger global inflation expectations in 2017.
For the first time in nearly five years, economists at HSBC
have raised their forecast for global growth and inflation over
the next two years based on robust manufacturing activity, a
resilient China and above all the fiscal boost expected to come
in the United States under incoming President Donald Trump.
The sustained producer price jump has not yet started
filtering into consumer prices, suggesting the People's Bank of
China will not be under immediate pressure to tighten monetary
policy, analysts say.
But policy insiders already expect a tilt towards more
conservative monetary policy this year as top leaders struggle
to strike a balance between supporting the economy with ample
credit and preventing a destabilising build-up in debt.
The PBOC reaffirmed it would keep liquidity in the financial
system stable while taking steps to prevent asset bubbles and
financial risks in its annual work meeting for 2017.
The government think tank, the China Academy of Social
Sciences (CASS), forecast that the country's CPI would grow 2.2
percent in 2017 and PPI would rise 1.6 percent for the year.
For 2016, CPI rose 2.0 percent while PPI slid 1.4 percent.
China's producer prices turned positive in September on an
annual basis for the first time in nearly five years, helped by
a rebound in commodity prices.
(Reporting by Elias Glenn; Editing by Kim Coghill)