China’s inflation tops forecasts as supply pressures worsen
China's factory-gate and consumer prices rose faster than expected in March as Russia's invasion of Ukraine, persistent supply chain bottlenecks and production snags caused by local Covid flare-ups added to commodity cost pressures.
The surge in raw materials costs is hobbling economies worldwide and in China has raised questions among some analysts about just how much its central bank will be able to ease monetary policy.
China's producer price index (PPI) increased 8.3 per cent year-on-year, data from the National Bureau of Statistics (NBS) showed on Monday. While that was slower than the 8.8 per cent seen in February, it beat a forecast for a 7.9 per cent rise in a Reuters poll.
Upstream pressures pushed up consumer prices, which rose 1.5 per cent year-on-year, the fastest in three months, speeding up from 0.9 per cent in February and beating expectations of 1.2 per cent.
Nomura analysts said possible delays in crop planting caused by new Covid-19 outbreaks in the country and the Ukraine conflict could create new food price pressures in the second half of the year.
"Rising food and energy price inflation limits the space for the (People's Bank of China) to cut interest rates, despite the rapidly worsening economy," Nomura said in a note. While the year-on-year PPI rise was the slowest since April 2021, this was mostly due to the lower comparisons from late 2020 and early 2021 seen in the previous months.
The monthly increase of 1.1 per cent, meanwhile, was the fastest in five months, driven by surging prices of domestic oil and non-ferrous metals due to geopolitical factors, an NBS statement said.
The world's second-largest economy came under downward pressure in March with renewed Covid-19 outbreaks and the manufacturing and service sectors reporting declines in activity.