Listen to this articleVarious reports have indicated that Chinese factory and consumer prices made unexpected jumps in March following the Russian attack on Ukraine. The Covid-19 pandemic generated commodity cost pressure including continuous supply chain issues and production challenges.
The increase in the cost of raw materials is limping worldwide economies. However, some analysts in China have raised concerns about the capability of the Chinese central bank to ease monetary policy. Today, the Chinese NBS (National Bureau of Statistics) said PPI (producer price index) rose 8.3% year over year.
However, it was steadier compared to 8.8% in February, which knocked a Reuter’s poll prediction for a 7.9% increase. The uplifting forces pushed up consumer prices, which increased 1.5% year over year. It was a rapid move in 3 months and accelerated from 0.9% in February with hammering predictions of 1.2%.
Covid-19 outbreak delayed Crop Planting
A famous analyst Marki Sehan said new Covid-19 outbreaks in the country generated supposed delays in crop planting. The Russia-Ukraine war could create new pressures on food prices during the mid of the current year. She said increasing food and energy price limits the space for the PBoC (People’s Bank of China).
Sehan said PBoC has to drop interest rates in spite of the quickly deteriorating economy. However, the year-over-year increasing PPI was the slowest-moving since April 2021. The lower comparison between the end of 2020 and the beginning of 2021 was the key reason behind the issue.
The Recent Increase was the Fastest in 5 Months
Meanwhile, the monthly 1.1% growth was the fastest in the last 5 months. The statement of NBS said the increasing prices of domestic oil and non-iron metals enabled a rapid increase. Oil and gas exploration prices increased 14.1% in a month, while coal, petroleum, and other fuel processing prices escalated by 7.9%.
The chief economist at Zhongruan Bank, Wang Jun said doubtfulness in the Russia-Ukraine war would badly affect goods supply globally. It would supposedly add a massive foreign inflation pressure on Chinese infrastructure. Keep in mind that China has the 2nd largest economy in the world, which came under pressure in March.
China announced New Policies to Support Economy
However, new Covid-19 outbreaks critically affected manufacturing and service sectors as they reported a downfall in activities. The Chinese authorities have announced policies to support the economy. It includes massive fiscal spending and a significant decrease in income tax for small companies. It is noteworthy that consumer prices have increased and inflation is still at its peak according to the global comparison.
The strict Covid-19 measures in Beijing’s district have pointed to a situation of poor consumption. Meanwhile, the food prices declined 1.5% compared to a 3.9% downfall in February. That situation resulted in a decrease of 0.28% points in the headline consumer price index.
A City-wide Lockdown in Shanghai
Moreover, China also reported 26,411 new symptomless cases on Sunday, with around 25 thousand in the financial hub in Shanghai. It is important that Shanghai is currently experiencing a city-wide lockdown. A chief economist for Greater China at ING, Iris Pang also issued a statement.
Pang said the economy of Shanghai is expected to decrease 6% this month alone due to the current strict lockdown. It could result in a 2% decrease in the GDP (gross domestic products) for entire China. However, the prices of some goods and products would remain up in the near future.
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