Consumer prices in China rose at their fastest pace in five months in April, official data showed Wednesday, as widespread COVID-19 lockdowns across major cities hit supplies of goods.
But the inflation remained relatively benign despite surging global commodity costs, which have forced central banks elsewhere to rapidly raise interest rates.
The data also showed China’s factory-gate inflation eased to a one-year low last month, as state-driven production efforts supported supply and curbs in key industries cooled demand, giving policymakers headroom for more stimulus to shore up a flagging economy.
The damage from Beijing’s strict zero-COVID-19 strategy has been increasingly reflected in economic data, as lockdowns in key cities such as Shanghai snarled supply chains and pushed up transportation prices.
April’s consumer price index (CPI), a key gauge of retail inflation, rose more than expected at 2.1% year-over-year, partly due to food prices, speeding up from March’s 1.5% growth, said the National Bureau of Statistics (NBS). It beat expectations for a 1.8% rise.
The COVID-19 outbreaks led to a rise in the CPI, the bureau’s senior statistician Dong Lijuan said.
It was due to "factors like the domestic epidemic and continued rise in international commodity prices," Dong said in a statement.
Since April, China’s biggest city Shanghai had been almost entirely sealed off.
Most of its 25 million residents have been confined to their homes, while goods piled up at its port as authorities rush to stamp out the worst COVID-19 resurgence since the early days of the pandemic.
Dong said that "due to the rise in logistics costs during the pandemic and increase in demand for stockpiling," prices of potatoes, eggs and fresh fruits ticked up.
The latest figures also showed that after four consecutive months of contraction, food prices overall rose for the first time on-year in April.
They grew 1.9% from a year earlier, compared with a 1.5% drop in March.
Annual CPI growth remains well below the government’s annual target of 3% this year, a sign consumer price pressures remain relatively contained.
"As such, inflation is unlikely to be a constraint on policy action by the PBOC (People’s Bank of China)," said Julian Evans-Pritchard, senior China economist at Capital Economics.
Factory inflation defies global surge
Meanwhile, the producer price index (PPI) – which gauges the cost of goods at the factory gate – came in at 8% year-over-year, the NBS said, higher than expected but down slightly from the 8.3% rise in March.
The slower rise in the PPI was driven by government measures to stabilize commodity prices and increase supply, Dong said.
China’s state planner on Tuesday called for stabilizing energy prices and an acceleration in oil and gas exploration and development.
Beijing has targeted daily coal production at 12.6 million tons this year and prioritized energy security in the wake of geopolitical uncertainties caused by the Ukraine conflict.
Price rises slowed in 22 of 40 industrial industry categories surveyed by the NBS, with prices in coal mining and washing up 53.4% year-over-year, down 0.5 percentage points from March.
Virus-related supply disruptions likely pushed up producer prices as well, Evans-Pritchard said.
But he added Wednesday that "the main source of higher prices continues to be oil, gas and iron ore," and that factory-gate prices of consumer durables and electronics were unchanged last month.
"We think producer price inflation will continue to drop back over the coming quarters," he said.
"Although there is still a great deal of uncertainty caused by the war in Ukraine, we generally think global commodity prices will end the year lower."
April’s weak economic reading follows industry data released Tuesday that showed China saw its largest drop in car sales in two years – likely due to consumer sentiment battered by COVID-19 restrictions.
Vehicle sales plunged a steep 35% to about 1 million in April, according to China Passenger Car Association – a drop not seen since March 2020.
China’s economy slowed sharply at the beginning of the second quarter, as authorities in dozens of cities imposed restrictions to stamp out COVID-19 outbreaks, with Shanghai currently in its sixth week of lockdown.