China Inflation Exceeds Expectations as Lockdowns Add Supply Pressure
2022.05.11 07:41
By Gina Lee
Investing.com – China’s factory and consumer prices accelerated faster than expected in April, as COVID lockdowns disrupted supply chains.
Data released earlier in the day showed that the consumer price index (CPI) for April 2022 grew 0.4% month-on-month and 2.1% year-on-year, compared to 0.6% and 1.6% recorded in March. The forecasts prepared by Investing.com expected a 0.2% growth month-on-month and a growth of 1.8% year-on-year.
The producer price index also rose 8% year-on-year, while Investing.com expected growth of 7.7%, and a growth of 8.3% was recorded in March.
The COVID-19 outbreaks and higher global commodity prices have contributed to the uptick in consumer inflation, said the National Bureau of Statistics senior statistician Dong Lijuan in a statement accompanying the data.
“Panic buying and stocking among consumers likely also pushed up demand,” Pinpoint Asset Management resident and chief economist Zhang Zhiwei told Bloomberg.
“As supply chain disruption is gradually resolved, inflationary pressure may fade away,” Zhang added.
The zero-COVID strategy in China has put many cities into lockdown, including Shanghai, one of the most important financial centers in China. The capital city Beijing, and e-commerce hub Hangzhou, have all rolled out restrictions to contain the virus.
The Shanghai lockdown has added pressures on the global supply chain and inflation concerns as the plunge in Shanghai freight traffic volume in April and early May has resulted in backlogs at the port, analysts at Fitch Ratings wrote in a note.
“With Shanghai handling around a fifth of China’s port volume and China accounting for 15% of world merchandise exports, shortages of manufactured goods could intensify, adding to existing global inflationary pressures,” the note added.
“This channel is likely to outweigh the effect of slower growth in China on global inflation through a weakening of commodity demand and prices.”
As long as the government could contain the virus and alleviate the supply chain disruption, the rise in consumer prices will be “benign” for the year, China Renaissance Securities Hong Kong Ltd. head of macro and strategy research Bruce Pang told Bloomberg.
The room for policy action by the People’s Bank of China “is more constrained by the policy tightening of overseas major economies and the need to maintain a stable yuan exchange rate,” Pang added.
