1st Ld-Writethru: China's producer prices improve in March

China's producer prices continued to drop in March with the contraction narrowing from the previous month, indicating more robust demand in the industrial sector, official data showed Monday.

The producer price index (PPI), a measure of costs for goods at the factory gate, dropped 4.3 percent year on year in March, narrowing from a 4.9-percent drop in February and 5.3-percent decline in January, according to the National Bureau of Statistics (NBS).

The reading marked the 49th straight month of decline as China's economic slowdown and industrial overcapacity weighed on prices.

Output price drops in oil, natural gas and coal, oil refining, ferrous metal smelting, chemical raw materials and chemical products contributed around 65 percent of the general producer price decline, said NBS statistician Yu Qiumei.

On a month-on-month basis, March's PPI inflation edged up 0.5 percent, the first such gain since 2014.

Yu attributed the improving producer prices mainly to the extended gains for some commodity prices and smaller drops in the price of oil refining.

The easing PPI contraction in March was mainly due to stabilizing commodity prices and the recovery in construction during the period, according to HSBC chief China economist Qu Hongbin.

Taken together with positive readings from the March PMIs, the upside surprise in factory gate prices is another indication that China's economy is on slightly firmer ground heading into the spring, said Tom Orlik, chief Asia economist at Bloomberg.

If the improvement is sustained, higher profits will be supported and China's corporate debt problem will appear slightly less formidable, said Orlik.

The data came along with the release of the consumer price inflation index (CPI), which rose 2.3 percent in March, the same as that in February. Endi