Economists surveyed predict that the country’s Producer Price Index (PPI) will increase by 0.5% year-on-year, reversing February’s contraction and marking a turning point for industrial price trends in the world’s second-largest economy, News.Az reports, citing Turkish media.
The recovery in factory prices is largely attributed to higher crude oil costs, fueled by geopolitical tensions in the Middle East, stronger global demand, and speculative market activity.
Zhang Yu, chief economist at Huachuang Securities, estimated that rising oil prices alone may have contributed between 1 and 1.2 percentage points to monthly PPI growth.
This highlights the growing impact of imported inflation on China’s production sector, where higher input costs are beginning to feed through into factory pricing.
Consumer inflation softens
In contrast, consumer inflation remains subdued. The Consumer Price Index (CPI) is expected to ease slightly to 1.2% in March, down from 1.3% in February, reflecting weaker domestic demand after the Lunar New Year period.
Wen Bin of China Minsheng Banking said food prices, particularly pork, declined significantly due to ample supply and reduced seasonal demand. Pork prices alone dropped around 10% month-on-month.
Meanwhile, services and other consumer-related costs also showed signs of softening.
Uneven economic signals
The divergence between rising producer prices and easing consumer inflation points to uneven economic momentum in China. While manufacturers face increasing cost pressures, consumer demand has yet to fully recover.
Wu Ge of Changjiang Securities cautioned that the rebound in factory prices does not necessarily indicate a broad improvement in corporate profitability. He noted that the increase is largely driven by external factors such as supply shocks and base effects rather than sustained demand growth.
Why it matters
The end of China’s prolonged factory price decline could signal a shift in global inflation dynamics, particularly in supply chains tied to Chinese manufacturing. However, weak consumer demand suggests that the recovery remains uneven, posing challenges for policymakers aiming to stabilize growth.
