China’s consumer and producer inflation jumped more than expected in April as the Middle East conflict drives commodity costs higher, offering a reflationary boost to the economy.
Consumer prices ticked up 1.2% in April from a year earlier, beating economists’ estimates of 0.9% growth in a Reuters poll, and accelerating from a 1% rise in March, according to data released by the National Bureau of Statistics on Monday.
The producer price index jumped 2.8% from a year ago, exceeding economists’ forecast of 1.6% and the 0.5% rebound in the prior month. The surge came after factory-gate prices turned positive for the first time in over three years, ending the longest deflationary streak in decades.
Price growth has been aided by a jump in global commodity prices as the Iran war, now in its third month, has throttled traffic through the Strait of Hormuz, upending energy markets.
“These reflationary forces could be welcomed by Beijing, following three years of protracted deflationary pressures,” said a team of economists at Nomura, while warning that the supply side-driven reflation risks further pressuring companies’ profit margins and dampening household consumption demand.
