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Factory gate prices in China increased for the first time in over three years last month, driven by rising global commodity costs and improved supply and demand in certain domestic sectors.
The producer price index, a key indicator of factory prices, advanced by 0.5% in March compared to the previous year. This marks the first gain since September 2022 and exceeded economists’ expectations of a 0.4% rise, based on recent data from the National Bureau of Statistics. Since last August, the PMI has shown an upward trend, with a slight dip in November.
The notable turnaround was primarily fueled by soaring crude oil prices, which pushed up costs across the petrochemical industry, according to China Merchants Securities. Additional contributors included the resumption of work after the Chinese New Year, sustained external demand, front-loaded fiscal stimulus, and new major projects, all of which supported higher prices for energy, chemicals, steel, and cement.
Statistical expert Dong Lijuan noted that international factors played a significant role in stabilizing or increasing prices, alongside improving supply and demand conditions within certain domestic markets.
Last month, geopolitical tensions disrupted global energy supplies, leading to higher oil prices and tightening liquidity around the world. A stronger US dollar also weighed on metal prices, explained Wen Bin, chief economist at China Minsheng Bank.
Within China, increased prices for petrochemicals have been passed downstream, with month-on-month rises seen in glass and rebar prices. Wen added that the early issuance of special government bonds also boosted infrastructure activity.
Looking forward, officials from the National Bureau of Statistics emphasized ongoing efforts to grow domestic demand and streamline supply, develop new productive capacities suited to local conditions, advance the construction of a unified national market, and stabilize industrial product prices to foster steady industrial growth.
Meanwhile, consumer inflation eased in March, with the consumer price index rising just 1% year over year, down from 1.3% in February and below economist forecasts of 1.2%. On a monthly basis, prices declined by 0.7%, reflecting seasonal demand softening after the New Year holiday.
Despite fluctuations in global energy prices and imported inflation, officials maintain that China has sufficient supply of goods and services to support price stability.
Proactive economic policies, such as measures to expand domestic demand, boost household incomes, develop new consumption scenarios, and improve the marketplace, are expected to help push prices upward in the near future.
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