US Markets
Update: China's Factory-Gate Inflation Surges to 45-Month High, Topping Expectations
(Updated the headline to add "Factory-Gate"; updated the first paragraph to note that inflation accelerated)China's inflation accelerated in April, with producer prices surging to their highest level in nearly four years, driven by global energy volatility.The consumer price index climbed 1.2% year on year, according to Monday data from the National Bureau of Statistics, rising higher than 1% in the prior month and beating market estimates of a 0.9% rise.The prices for the non-food sector rose by 1.8%, but food prices dropped by 1.6%.Within the food category, meat prices declined by 6.7%, with pork prices surprisingly slumping 15.2%.Analysts believe the drag on pork prices will wane in the coming months, especially with pork prices expected to stabilize ahead of Beijing's upcoming Politburo."Destocking will likely quicken as the top leadership has called to stabilize pork prices at April's Politburo meeting," ANZ's senior China strategist, Zhaopeng Xing, said in a note. "We expect pork price to bottom out in H2 2026.""We expect this drag to fade in the coming months, though China's typical pork cycle could be affected by ongoing deals to buy soybeans, leading to oversupply," Lynn Song, ING's chief economist for Greater China, said. "With soybeans as a key input for pig feed, excess supply could potentially keep pork prices suppressed longer than normal."Meanwhile, China's producer price index jumped 2.8% in April from a year earlier, accelerating from the 0.5% growth in March, NBS data showed.The PPI surpassed market estimates of a 1.8% rise, as well as the 1.6% climb predicted by analysts surveyed by Reuters.Energy-related industries posted the largest year-over-year changes, reflecting the impact of the Middle East conflict on oil and energy prices.The oil and gas extraction sectors grew by 28.6%; petroleum, coal, and other fuel processing industries increased by 14.2%; and non-ferrous metal mining and beneficiation rose by 38.9%.ANZ estimated that gasoline's weight in the CPI was reduced to 2.9% from 3.3%, reflecting a shift towards electric vehicles as the Iran war caused oil prices to jump.However, the prices of consumer goods, especially food, clothing, and other daily necessities, all dropped, as did the prices of durable consumer goods.Song said it is likely that China's central bank may hold interest rates steady as a result of the better-than-expected CPI and PPI."It looks increasingly likely that such a move won't happen until at least the second half of the year, barring a significantly sharper-than-expected deterioration in activity data ahead," Song said.
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