More than three years of falling wholesale prices in China suddenly reversed in March as the rising cost of oil and other commodities began to affect a range of industries.
Producer prices — mainly those charged by factories for wholesale purchases — climbed last month compared to a year earlier for the first time since September 2022, according to government data released on Friday.
The war in the Middle East, which started on Feb. 28 with strikes by the United States and Israel on Iran, leading Iran to retaliate by effectively shutting the Strait of Hormuz, has prompted higher prices and shortages of energy and other commodities. For example, Persian Gulf exports previously accounted for nearly a tenth of the world’s aluminum.
While governments in many countries, including in the United States and Europe, brace for the trauma of higher prices that eat into consumer spending, China had the opposite problem before the war.
Falling wholesale prices have plagued the Chinese economy. Thousands of manufacturers have had to sell their goods for less and less. Consumer prices have also stagnated in China and occasionally fallen, helping to depress wages.
The Bureau of Labor Statistics is scheduled to release consumer price data for the United States on Friday in Washington. Those numbers will be scrutinized for the extent to which the Middle East war may be affecting inflation and affordability in the United States. Rising prices in China can seep through to prices in the United States, because much of America’s supply of manufactured goods comes directly from China or indirectly, through countries like Vietnam and Mexico.
A broad fall in the price level across an economy, a phenomenon known as deflation, makes it hard for companies to pay their debts and their workers. Chinese policymakers have been so wary of deflation that they have banned the country’s economists from publicly discussing its dangers.
Producer prices rose 0.5 percent in March from a year earlier, led by increases in prices not just for fuel but also for aluminum. Producer prices fell 0.9 percent in February.
Because the increase in producer prices mainly involved higher prices for imported raw materials, however, the benefit for Chinese manufacturers’ profitability may be limited.
Inflation in consumer prices slowed slightly last month with the fading of a brief surge in spending during Lunar New Year celebrations in February.
Consumer prices were up 1 percent in March from a year earlier, compared with 1.3 percent in February. Weak spending in China, mainly the result of a prolonged housing market downturn, has made it hard for companies to raise retail prices.
China also has a surfeit of pigs that has driven down prices for pork, a staple of the Chinese diet and an important component of the country’s Consumer Price Index. Wholesale pork prices hit an eight-year low in March.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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