China's producer price index (PPI) in April posted a gain that far exceeded market expectations, extending its rebound. The consumer price index (CPI) also maintained a modest rise. However, analysts said it is still too soon to read these inflation figures as a sign of economic recovery, noting that the improvement reflects short-term inflation driven more by higher energy and raw material costs stemming from the Iran war than by a recovery in demand.
China's National Bureau of Statistics said on the 11th that April's PPI rose 2.8% from a year earlier. That beat Bloomberg's market forecast of 1.8% by a wide margin and marked a sharp acceleration from March's 0.5% increase. After turning positive in March for the first time in 41 months, China's PPI extended its rebound this month with a wider gain.
Over the same period, the CPI rose 1.2% year over year, topping both the market forecast of 0.9% and the prior month's 1.0%. Core CPI, which excludes volatile food and energy, also climbed 1.2%, slightly faster than the prior month's 1.1%.
Markets see rising global oil prices amid Middle East tensions and a rebound in raw material prices as lifting producer prices. The Chinese government's recent push to strengthen its "anti-nei juan" policy line to curb excessive competition in some industries, including steel, batteries and automobiles, is also cited as adding to price pressures.
Dong Lijuan, chief statistician at the National Bureau of Statistics, said, "The rise in international oil prices driving up domestic prices in oil-related industries was the main factor," adding, "Increased domestic demand in sectors such as optical fiber, storage devices, nonferrous metals and coal also contributed to the rise in producer prices, and the continued improvement in domestic market competition order played a part as well."
The CPI was also heavily affected by higher oil prices. Dong, the chief statistician, said it was "mainly due to higher energy and travel service prices," adding, "In some regions, demand for travel services surged because of the Qingming Festival, Labor Day and Lunar New Year holidays."
By contrast, the recovery in consumption remains limited. Although CPI is continuing to rise, the overall strength of domestic demand is still not strong due to a slowdown in service consumption, a sluggish property market and weak pork prices. In fact, pork prices, considered a practical gauge of inflation, fell 5.7% in the month from a year earlier.
Foreign media noted that while China's economy appears on the surface to be emerging from a protracted deflationary phase, in reality short-term price increases are pushing up inflation, limiting the extent to which this can be read as a recovery signal. In particular, with producer prices rising far faster than consumer prices, corporations are quickly facing higher expense burdens, raising the possibility that China's manufacturing profitability will deteriorate and domestic demand will contract ahead.
Bloomberg News said, "Amid weak domestic demand and signs of a deteriorating labor market, corporations are unable to pass on higher expenses to consumers, increasing pressure on profitability," adding, "As evidence, the purchasing price index rose 3.5% from a year earlier. That is the widest gap with selling prices since Aug. 2024."