(Bloomberg) -- China’s producer prices climbed the most since July 2018 as commodity costs surged and the economy’s recovery strengthened. Consumer prices gained for the first time in three months.

  • The producer price index rose 4.4% in March from a year earlier after gaining 1.7% in February, the National Bureau of Statistics said Friday. The median forecast in a Bloomberg survey of economists was 3.6%
  • The consumer price index rose 0.4% from a year earlier

Key Insights

  • After months of deflation, producer prices have started to pick up sharply this year as the cost of oil, copper and agricultural goods rally
  • As the world’s biggest exporter, rising prices in China threaten to stoke global inflation further and add more turmoil to financial markets. Inflation risks are already mounting because of a stronger recovery in the world economy, massive fiscal stimulus in the U.S. and soaring shipping costs
  • For Chinese businesses, rising factory prices mean higher profits and more capacity to repay debt. Industrial profits more than doubled in the first two months of the year from the same period in 2020, recent data showed
  • Consumer-price deflation in recent months was mainly driven by falling pork prices, a key component of the CPI basket. While prices are likely to pick up, the slow recovery in household spending means inflation will likely remain subdued
  • The central bank has vowed to avoid any sharp policy turn as it gradually tapers the stimulus it pumped into the economy last year. Growth in producer prices will likely ease from the third quarter, Huang Wentao, an analyst at China Securities Finance Co., said before the data was released

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  • The rapid pace of inflation has gained the attention from top policy makers, with the Financial Stability and Development Committee chaired by Vice Premier Liu He calling for efforts to stabilize prices this week. Authorities should “keep a close eye on commodities prices,” according to a statement released Thursday evening after the committee met.

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