(Yicai) May 12 -- Consumer and producer prices increased in China last month from a year earlier, after energy costs rose on the back of pricier international crude oil.

The consumer price index rose 1.2 percent in April, up from 1 percent the previous month, according to data released by the National Bureau of Statistics yesterday. On a monthly basis, the CPI expanded 0.3 percent, reversing a 0.7 percent decline in March.

Energy prices climbed 5.7 percent year on year amid costlier oil as a result of the prolonged conflict in the Middle East, with gasoline jumping 12 percent from March. The China Passenger Car Association attributed last month’s worse-than-expected 22 percent drop in retail auto sales mainly to high global oil prices crimping demand for gas-driven cars.

April’s CPI increase was generally in line with seasonal patterns, as domestic prices have not fundamentally changed despite the impact of imported inflation, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International. The consumer goods market is still showing strong supply and weak demand, leaving room for further policy support to boost consumption, he added.
Consumer prices have risen every month in China since inflation returned last October after a several months of falling prices last year. The People's Bank of China, the country’s central bank, yesterday warned about imported inflation risks driven by surging international oil and commodity prices.

Wang expects inflation to rise by around 1.4 percent this month.

Demand for travel services soared last month because of the Tomb Sweeping Festival, Labor Day holiday, and spring break in some regions, driving up airfares by 29 percent and hotel prices by 3.9 percent from March.

Food prices dropped 1.6 percent as the supply of fresh vegetables and pork remained stable, exerting downward pressure on the CPI.

The core CPI, which excludes food and energy prices, increased 1.2 percent in April from a year earlier, remaining largely unchanged from March.

Factory Gate Prices

China’s factory gate prices rose for a second consecutive month in April, after falling each month for more than three years.

The producer price index jumped 2.8 percent from a year ago, compared with a 0.2 percent uptick in March, primarily driven by the energy and chemical industry chain, according to the NBS data. That was the biggest increase since July 2022. The PPI rose 1.7 percent on a monthly basis, up from 1 percent.

Rising global oil prices pushed costs in the oil and natural gas extraction industry up 19 percent month on month, while the petroleum, coal, and other fuel processing industries recorded a more than 16 percent increase. Optical fiber manufacturing prices soared 23 percent, buoyed by the rapid growth in domestic demand for computing power.

Manufacturing prices for lithium-ion batteries inched up 1.6 percent, while those for new energy vehicles fell 0.7 percent, showing that efforts to curb involution-style competition are taking effect.

April’s PPI increase surpassed expectations, with price hikes highly concentrated in the energy and chemical industry chain, according to China International Capital Corporation. As talks between the United States and Iran are still ongoing, global oil prices are likely to remain volatile at high levels.

CICC believes that both the PPI and CPI still have space to climb over the next two months.

The global transmission effect of oil price shocks is beginning to manifest, with several economies experiencing significant rises in PPIs, said Wu Ge, chief economist at Changjiang Securities. Historically, there is a lag in the full realization of price increase expectations following cost shocks, and it is possible that the peak is yet to come, he added.

Changes in prices imply that the focus of macroeconomic policy will gradually shift towards price stabilization, Wang noted. As a result, the timing for the introduction of growth-stabilizing policies may be postponed.

Editor: Futura Costaglione