China factory inflation higher than expected as oil prices bite
Oil and gas pump
China'sfactory-gateinflationwashigherthanexpectedin March, official data showed Monday, as Russia's war on Ukraine pushes upoilpriceswhile a domestic COVID-19 resurgence strains food supplies and consumer costs.
The producer price index (PPI) -- measuring the cost of goods at thefactorygate -- grew 8.3 per cent on-year, National Bureau of Statistics (NBS) figures showed.
This was slightly morethana Bloomberg poll of economistsexpected, while PPI also rose on-month.
"Geopolitical and other factors have pushed global commoditypricesto continue increasing, driving thepricesofoil, non-ferrous metals and other related industries to rise further domestically," NBS senior statistician Dong Lijuan said in a statement.
China's consumer price index (CPI), a key gauge of retailinflation, rose morethanexpectedas well, by 1.5 per cent on-year in March, the NBS said.
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Although consumer demand eased after festive periods earlier in the year, some foodpriceshave picked up due to "rising internationalpricesof wheat, corn and soybeans" and domestic COVID-19 outbreaks, Dong said.
This comes as world foodpriceshit an all-time high in March following Russia's invasion of Ukraine, an agricultural powerhouse, according to a UN agency.
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Russia and Ukraine make up a massive share of exports in major commodities such as wheat, vegetableoiland corn.
Zhaopeng Xing of ANZ Research said energypriceshad "become the major driver for both CPI and PPI".
"CPIinflationcould rise further in April as households acrossChinahave been stocking up on food and other necessities after taking lessons from the fallout of Shanghai's lockdown," Nomura's chiefChinaeconomist Ting Lu told AFP.
As the financial hub locked down almost entirely in recent weeks, residents had trouble getting groceries while Covid controls snarled supply chains to the rest of the country.
"Due to lockdowns and transport disruptions in northeastChina, the largest grain production base inChina, this year's spring farming may have been delayed and the risk of food shortage may rise in the second half," Lu added.
This piles pressure on the worsening global food shortage caused by the military conflict in Ukraine, he said.
