China’s Producer Price Index just posted its sharpest jump in 45 months. The 2.8% year-on-year increase in April, reported by the National Bureau of Statistics, marks a dramatic reversal for an economy that spent the better part of three and a half years watching factory-gate prices fall.
The culprit is familiar: energy. Conflict in Iran and disruptions at the Strait of Hormuz, the narrow waterway through which a massive share of the world’s oil trade flows, have sent commodity prices surging.
The numbers behind the surge
In March, China’s PPI managed a modest 0.5% year-on-year gain, barely positive and still carrying the hangover of a 41-month deflationary streak. One month later, that figure jumped to 2.8%. The monthly gain alone was 1.7%.
Analysts had expected something in the range of 1.5% to 1.6%. The market was bracing for a noticeable uptick, and still got caught off guard by the magnitude.
