China Factory Prices Rise for First Time in Over Three Years Amid Oil Surge

China’s factory-gate prices rose for the first time in more than three years in March, driven by higher oil costs linked to global supply disruptions.

Data from the National Bureau of Statistics showed the producer price index (PPI) increased 0.5% year-on-year, ending a prolonged period of deflation that began in 2022.

Consumer prices, however, rose at a slower pace. The consumer price index (CPI) increased 1% from a year earlier, missing market expectations and easing from the previous month’s rise.

The rebound in factory prices comes as oil prices surged בעקבות disruptions caused by the US-Iran conflict, which impacted global energy supply and pushed up input costs for manufacturers.

International crude benchmarks climbed sharply during the conflict, with Brent crude rising significantly compared to pre-war levels, increasing cost pressures across industrial sectors.

China, the world’s largest oil importer, has faced rising fuel costs despite efforts by authorities to limit price increases. Gasoline prices jumped more than 11% on a monthly basis, reflecting the impact of higher global oil prices.

Economists warned that rising input costs could lead to so-called “cost-push” inflation, squeezing profit margins for manufacturers already operating under tight conditions.

Analysts also noted that while China’s diversified energy sources and policy flexibility may cushion the broader economic impact, prolonged high oil prices could slow economic growth.

Forecasts suggest China’s economic expansion could weaken if oil prices remain elevated or rise further, particularly if supply disruptions persist in the coming months.