Producer price grows at fastest pace in 2 years

CHINA'S producer prices expanded at the fastest pace in more than two years, driven by surging energy costs, the National Bureau of Statistics said today.

The country will face strong inflationary pressure in the first half next year and will be cautious transferring higher producer prices onto consumers, analysts said.

The Producer Price Index, the main gauge of factory-gate inflation, rose 4.6 percent last month from a year earlier, outpacing October's 3.2 percent growth and a 2.7 percent jump in September.

The faster acceleration coincided with a surge in crude oil costs, which climbed 22.6 percent in November, compared with a 4.2-percent jump in October.

"The fuel costs contributed the most to last month's PPI acceleration. However, it was not derived from a huge supply-demand imbalance, but mainly out of global speculative activities," said Zhang Qi, an analyst with Haitong Securities Co.

"As fuel prices stabilize on the international market, pressure on producers will drop a bit."

But the country should take measures to diversify its sources of oil and make more use of alternative energy to counter the possible inflation peak in the first half of next year, said Zhang.