China factory inflation surges to 45-month high as global energy prices rise

China’s producer prices rose to a 45-month high in April, exceeding expectations, while consumer inflation also accelerated as global energy costs remained elevated, News.Az reports, citing Reuters.

The increases add pressure on manufacturers already struggling with weak domestic demand.

Analysts said cost-push factors were unlikely to trigger major policy shifts, as they reduce the urgency for looser monetary policy to support growth.

They also noted that price levels are still expected to remain below China’s official inflation target range.

According to data from the National Bureau of Statistics (NBS) released on Monday, the producer price index (PPI) increased 2.8% year-on-year, surpassing a Reuters poll forecast of a 1.6% rise. In March, the index had ended a 41-month streak of declines by rising 0.5%.

“The fallout from the Iran war pushed up inflation again in April, but price pressures remain narrow in scope and aren't likely to build into a wider reflationary impulse,” Capital Economics analysts said.

On a monthly basis, PPI rose 1.7% in April, following a 1% increase in March.

The NBS said higher factory-gate prices were driven mainly by rising costs in sectors such as non-ferrous metals, oil and gas, and technology equipment, according to statistician Huo Lihui.

Chinese policymakers have repeatedly pledged to boost weak domestic consumption, curb excessive competition, and support a recovery in prices as deflationary pressures continue to weigh on corporate profit margins.

However, analysts warned that inflation driven by external shocks does not reflect an improvement in supply-demand conditions and could create additional challenges for China’s export-oriented economy.

Energy prices are expected to remain elevated, with oil unlikely to return to pre-war levels, though inflation is still seen as having only a limited impact on policy decisions, said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Rising global energy costs have also pushed up living expenses. China’s state planner has raised retail gasoline and diesel prices since the U.S.-Israeli attacks on Iran began in late February, though increases have been capped to limit consumer impact. Major Chinese airlines have also increased fuel surcharges on domestic flights.

Meanwhile, the consumer price index (CPI) rose 1.2% year-on-year in April, up from 1% in March and above Reuters’ forecast of 0.9%. The increase was driven largely by fluctuations in gasoline and gold jewellery prices, according to the NBS.

Higher living costs may further weaken household consumption, which has already been subdued due to slower economic growth and a prolonged property market downturn.

Food prices fell 1.6%, with pork prices dropping 15.2%.

Core CPI, which excludes food and energy, rose 1.2% year-on-year compared with 1.1% in March.

On a monthly basis, CPI increased 0.3%, beating expectations of a 0.1% decline and reversing March’s 0.7% drop.

In financial markets, the Shanghai Composite index rose 0.9% by midday, while the blue-chip CSI300 index gained 1.4%.

News.Az 

By Nijat Babayev