China Factory-Gate Inflation Accelerates to 3.9%, Fastest Since July 2022, on War-Driven Energy Costs

China's producer price index rose 3.9 percent year on year in May, the National Bureau of Statistics reported June 10, accelerating from April's 2.8 percent and matching market forecasts — the fastest factory-gate inflation since July 2022 and the third consecutive month of increases after a years-long deflationary stretch that ended in March. The surge was driven by war-inflated energy and commodity costs: mining prices rose 15.8 percent, raw materials 9.2 percent and processing 2.3 percent, while domestic gasoline prices were up 23.5 percent from a year earlier, per Reuters.

Consumer inflation stayed muted, with CPI up 1.2 percent year on year, unchanged from April, and core CPI at 1.1 percent; food prices fell 1.7 percent, led by a 16.1 percent drop in pork, and car sales slumped 22.3 percent in May. Month on month, PPI rose 0.5 percent while CPI slipped 0.1 percent.

Xu Tianchen of the Economist Intelligence Unit said firms in AI-linked sectors 'can pass on higher input cost and even charge end consumers a markup,' while ING's Lynn Song said China is 'moving from deflation into a low inflation environment.' Separately, customs data showed May crude imports fell 29 percent to an eight-year low.