Shoppers walk past a Coach retail store in a shopping mall on March 24, 2026 in Shenzhen, Guangdong province, China.
Chen Xin | Getty Images
Inflation for Chinese consumers and producers rose more than expected in April as the Middle East conflict raised commodity prices and had a reflationary effect on the economy.
Data released by the Office for National Statistics on Monday showed consumer prices rose 1.2% in April from a year earlier, beating the 0.9% rise expected by economists polled by Reuters and accelerating from a 1% rise in March.
The producer price index rose 2.8% from a year earlier, beating economists’ expectations of 1.6% and beating the previous month’s 0.5% rebound. The surge comes after factory prices turned positive for the first time in more than three years, ending the longest period of deflation in decades.
Rising global commodity prices are helping push prices higher as the Iran war enters its third month, snarling traffic in the Strait of Hormuz and disrupting energy markets.
“After three years of deflationary pressures, these reflationary forces may be welcomed by the Chinese government,” Nomura’s economist team said, but warned that supply-side-driven reflation risks further squeezing corporate profit margins and suppressing household consumption demand.
Domestic demand remains weak, with retail sales slowing sharply to 1.7% in March, lower than expected. The real estate recession continues, with investment declining by 11.2% as of March this year, worse than the 9.9% decline in the same period last year.
China, the world’s biggest oil importer, has cushioned the worst of the energy shock with strategic oil reserves and a diverse mix of renewable energy sources, but economists warn there are limits to the buffer as the turmoil drags on.
Data released on Saturday showed that China’s crude oil imports fell 20% in April compared to the same month last year.
But the country’s overall export growth accelerated last month, rising 14.1% year-on-year, pushing the monthly trade surplus to $84.8 billion and putting the country on track to post a surplus of about $1 trillion for the third consecutive year.
As US President Donald Trump prepares to visit Beijing for a summit, all eyes will be on the strength of China’s exports next week, as its trade surplus with the US has grown to $87.7 billion so far this year.
Chinese President Xi Jinping is expected to host Trump later this week as the two countries seek to stabilize relations strained by tensions over trade, export controls, Taiwan and the war with Iran.
Economists at Goldman Sachs say they expect the Middle East conflict to feature prominently at the summit, as Beijing, which hosted Iranian Foreign Minister Abbas Araghchi last week, has positioned itself as an active mediator in efforts to reopen the Strait of Hormuz.
