China producer prices turns positive as inflation gets boost from Iran oil shock
HUAIAN, CHINA – MARCH 09: Vehicles queue at a gas station in Huaian, China’s Jiangsu Province, on March 9, 2026.
Zhao Qirui | Visual China Group | Getty Images
Ex-factory prices in China rose for the first time in more than three years, while consumer inflation slowed in March due to the rise in oil prices as the Iran war disrupted global energy markets.
According to data released by the National Bureau of Statistics on Friday, the consumer price index increased by 1 percent in March compared to the previous year; It missed economists’ forecast of 1.2 percent growth in a Reuters poll, slowing from a 1.3 percent increase in February.
Producer prices rose 0.5% from a year earlier, the first increase since September 2022 and ending the longest streak of deflation in decades.
The war between the United States and Iran, now in its sixth week, has sent oil prices soaring after Tehran closed the Strait of Hormuz to most commercial tankers and major producers in the Middle East restricted oil production.
International comparison Brent The June contract was at $96.7 a barrel on Friday, following a 33% rise since the war began on Feb. 28. USA WTI Crude oil contracts for May delivery were at $98.5 per barrel, up 47% from pre-war levels.
Although China, the world’s largest oil importer, faces possible inflation spillovers, its massive strategic stockpile onshore and diversified energy resources have provided some support to the economy.
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The Wall Street bank cut its forecast for China’s GDP growth this year by 10 basis points to 4.7%, based on the assumption that oil will average $110 a barrel in the second quarter before falling.
China’s real GDP could slow to 4.2% this year if the conflict in the Middle East continues to worsen and oil prices rise above $150 a barrel in the second quarter, according to a Wall Street bank. “Even if the strait is reopened, the slow normalization of supply and rebuilding of stocks may keep oil prices high,” Xing said.
In a sign of already mounting pressure, China’s top economic planning agency issued the following statement on Tuesday: Retail sales prices of gasoline and diesel increased increased by 420 yuan ($61.18) and 400 yuan per metric ton, respectively. Last month, policymakers raised prices by 1,160 yuan and 1,115 yuan per ton.
Turmoil in oil markets has the potential to change policymakers’ calculus, as economists warn that the input cost shock could trigger “bad inflation” in the economy and further squeeze producers’ already thin profit margins.
The People’s Bank of China reaffirmed its cautious monetary expansion stance at its quarterly meeting last month, dampening hopes for a rate cut this year. The central bank reduced the policy rate by only 10 basis points in 2025.
The yield on China’s 10-year government bonds remained relatively stable at 1.814% on Friday, despite ongoing concerns about rising oil prices.
