Data from the National Bureau of Statistics released on Friday indicated that Bloomberg reported a 0.5% rise in producer prices in March compared to the same month last year, reversing a previous decline of 0.9%.
However, as the seasonal boost from holiday spending faded, consumer inflation fell more than expected to 1%, down from 1.3% in February. When excluding volatile items like food and energy, the core consumer price index decreased to 1.1%.
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Since late 2022, China has been trapped in a deflationary cycle due to intense price competition, which has eroded corporate profits and restricted wage growth amid overproduction and weak domestic demand.
Nonetheless, China’s manufacturing prices rebounded above zero sooner than expected at the start of the year, driven by rising energy costs following the US and Israeli strikes on Iran and Tehran’s subsequent retaliation, likely ending an unprecedented streak of deflation in the economy.
The disruption of global energy supplies caused by the conflict in the Middle East continues to elevate costs for producers, even as China demonstrates greater resilience to oil price shocks due to years of investment in renewable energy and efforts to secure a stable supply.
Since the conflict began on February 28, China has raised petrol prices three times, with an increase of approximately 25%.
A recovery driven by rising commodity prices does not necessarily indicate an improvement in the overall economy.
If a singular shock occurs without diminishing excess industrial capacity or boosting consumer spending, companies may bear the brunt of the increased costs. Manufacturers are struggling to transfer these price hikes to consumers, resulting in even slimmer profit margins.
(Edited by : Juviraj Anchil)
