China’s PPI inflation likely to have eased further in April, says DBS Bank

China’s PPI inflation is likely to have eased further in April. According to a DBS Bank research report, the PPI inflation is expected to have slowed to 6.5 percent in April from March’s 7.6 percent. Keeping the base effects aside, the moderation was greatly due to declining commodity prices. Copper and iron ore prices have also dropped sharply. The declining prices were linked to a bout of government property curbs, which has boosted concerns over the demand prospects for raw material. Regulators’ crackdown on speculation and borrowing would probably continue to put downward pressures on metal prices.

Mainland-listed companies have recorded rapid earnings growth, owing to the turnaround in PPI from deflation to inflation in September 2016. Upstream industries such as coal, petrochemical and commodity firms led the growth with over 300 percent rise.

Amid signs of softness in prices, China’s enterprises income growth is set to decelerate. The rebound in business conditions has not been even. This is see in the limited “pass-through” of price change from PPI to CPI, added DBS Bank.