By Gina Lee

Investing.com – China’s producer price jumped in April, but consumer inflation saw modest gains, as soaring commodity prices increased concerns about inflation.

Data from the National Bureau of Statistics (NBS) said that China’s producer price index (PPI) grew 6.8% year-on-year in April, the highest since October 2017. It exceeded the 6.5% growth in forecasts prepared by Investing.com and March’s 4.4% growth.

Meanwhile, the consumer price index (CPI) fell 0.3% month-on-month in April, lower than the 0.2% contraction in forecasts prepared by Investing.com but above March’s 0.5% decrease. The CPI grew 0.9% year-on-year, slightly below the 1.0% growth in forecasts prepared by Investing.com while remaining above March’s 0.4% growth.

The widening gap between the CPI and PPI “suggests an uneven recovery of the economy,” said Raymond Yeung, chief China economist at Australia&New Zealand Banking Group (OTC:ANZBY) Ltd.

“Despite the commodity boom, the service sector has yet to catch up... wages are lagging and the People’s Bank of China (PBOC) will likely keep its policy stance 'largely neutral,'" he added.

Investors are also concerned that a commodities boom in the world’s biggest exporter, which was driven by increasing global demand and supply shortages, will lead to inflation globally as manufacturers start passing on higher prices to retailers.

Some central banks, including the U.S. Federal Reserve, maintain the view that any inflation is temporary. However, Chinese policymakers insist that it can limit the impact of commodity prices on the domestic economy and control price growth. Meanwhile, the government also pledged to limit costs to firms by taking further measures to control the raw materials market.

The PBOC is also looking to slow down its stimulus measures rolled out as COVID-19 spread in 2020, due to concerns over the buildup of debt. Economists also expect a slowdown of credit expansion instead of interest rate growth.

Meanwhile, the Communist Party’s Politburo said in April that it will not hand down any sharp reversal of macroeconomic policies.

While China targets to keep its consumer inflation at around 3% this year, the index is expected to be “significantly lower” than the official aim in 2021, said an NBS official.

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