China’s consumer prices rose in April as the cost of crude oil rose globally due to the Iran war, official data showed on Monday.
Aided by rising oil costs, factory gate prices also continued to show signs of recovery, rising for the second straight month after being stuck in negative territory since October 2022.
However, analysts warn that deflation is still a threat to the world’s second-largest economy, as prices in other sectors continue to fall and overcapacity remains a headache.
China’s consumer price index (CPI), a key measure of inflation, last month rose 1.2 percent year-on-year, data from the National Bureau of Statistics showed.
The jump was due to “changes in international crude oil prices and increased demand for holiday travel,” according to Dong Lijuan, NBS chief statistician.
Domestic gas prices rose 19.3 percent year-on-year, Dong said, affected by international commodity price fluctuations.
A five-day holiday in early May also typically sees more travel and spending in the weeks leading up to it.
However, last month’s CPI was still well below the government’s two percent target for the year.
April’s producer price index (PPI), which measures wholesale inflation, rose 2.8 percent on the year – up from 0.5 percent in March.
It beat a Bloomberg forecast of 1.8 percent and marked the fastest pace since July 2022, when PPI rose 4.2 percent annually.
The gauge slipped into negative territory that October and didn’t return until March.
“Rising international crude oil prices boosted prices in domestic oil-related sectors,” NBS’s Dong said in a statement, listing fuel refining and raw material production.
But analysts warn that the shocks caused by the Middle East oil blockade are temporary.
“Fallout from the Iran War pushed up inflation again in April, but price pressures remain narrow in scope and are unlikely to build on a broader reflationary impulse,” Capital Economics said in a note.
“(With) overcapacity in most sectors unresolved and domestic demand growth still sluggish, the ingredients for a sustained reflationary impulse still appear to be lacking.”
