China’s factory-gate prices rise in May driven by digital and seasonal demand

According to China’s National Bureau of Statistics (NBS), the country’s producer price index (PPI) edged up by 0.5% month-on-month and 3.9% year-on-year in May. The month-on-month growth marked a 1.2-percentage-point slowdown from April’s reading.

Three core drivers have shaped the latest monthly PPI movement. Industrial structural upgrading and digital integration have lifted pricing across multiple manufacturing sub-sectors. Ongoing nationwide industrial equipment renewal has pushed up prices in ferrous metal smelting and rolling by 1.2% month on month. Surging computing power demand, paired with deep AI industrial adoption, has buoyed non-ferrous metal and electronic manufacturing costs. Tin and copper smelting prices grew by 4.8% and 3.1% respectively, while integrated circuit packaging and external storage component prices rose by 2.9% and 1.9%. Fibre optic and power cable manufacturing also recorded notable price hikes of 8.0% and 1.2%.

Seasonal summer-oriented demand has created further upward price pressure. Pre-summer coal stockpiling for power generation and industrial use lifted coal mining and washing prices by 3.2% month on month. As temperatures climbed nationwide in May, factory prices for household air conditioning and cooling appliances increased by 0.9% and 0.3%, alongside a 0.4% rise in industrial power supply tariffs.

Fluctuations in global crude oil prices have reversed domestic energy-linked pricing momentum. Domestic crude oil extraction prices fell by 1.8% month on month in May, compared with a 24.1% monthly surge in April. Refined petroleum product prices dipped by 0.3% after sharp growth in the prior month. Price inflation in chemical raw materials, chemical fibres and plastic products all slowed visibly, with month-on-month growth rates falling by 6.3, 4.1 and 0.2 percentage points respectively.

Year-on-year PPI growth widened by 1.1 percentage points from April. Six upstream and midstream manufacturing sectors acted as the main contributors to headline inflation. Non-ferrous metal ore mining saw the steepest annual rise at 36.5%, followed by non-ferrous metal processing at 24.0%. These six sectors jointly added 2.56 percentage points to annual PPI growth, a 0.51-percentage-point increase on April. Oil and gas extraction and fuel processing sectors added another 1.96 percentage points to annual PPI growth.

Four industrial sectors dragged down annual factory-gate inflation. Non-metallic mineral products, power and heat supply, motor vehicle manufacturing and agricultural food processing posted year-on-year price falls, collectively cutting annual PPI growth by 0.75 percentage points. The downward drag saw only a marginal month-on-month change.

Per industry tracking data from China Daily’s economic desk, cross-border bulk commodity volatility will continue to reshape domestic industrial pricing in June. Cooling external oil price fluctuations will further ease cost pressure on downstream chemical enterprises, while sustained AI infrastructure construction and summer power demand will maintain steady price support for metal and electrical manufacturing segments.