Staff members work at a vegetable warehouse in Songjiang district of East China's Shanghai, April 1, 2022. - Xinhua
BEIIJING (Bloomberg): China’s factory gate prices rose faster than expected in April, while consumer prices climbed again, as Covid outbreaks and lockdowns last month drove food costs higher.
The producer price index rose 8% from a year earlier compared to 8.3% in March, official data showed Wednesday (May 11), above the median estimate of a 7.8% increase in a Bloomberg survey of economists. Consumer-price growth accelerated to 2.1% from 1.5% in the previous month, faster than a projected 1.8% gain.
While commodity prices are inching down from the very high levels spurred by the war in Ukraine, costs remain elevated and have squeezed manufacturers’ profits. Covid outbreaks in China and restrictions intended to contain them have indirectly added to operating costs, making it tougher for factories to maintain production, obtain raw materials and ship out finished goods.
The economic damage from China’s Covid outbreaks and containment measures became pronounced in April when activity in both the manufacturing and services sectors contracted sharply. And while policy makers promised to boost stimulus to help the economy reach a growth target of about 5.5% for the year, top leaders have also made it clear they’re sticking with Covid Zero.
The decision to stand by a strategy built on strict Covid curbs has led several economists to cut growth forecasts for the year, as an unswerving commitment to Covid Zero means more cities will lock down or mass test their citizens for as long as the virus is spreading. The capital city Beijing, e-commerce hub Hangzhou and Yiwu, a city known for wholesaling Christmas decorations, have all rolled out restrictions to contain the virus. Parts of Shanghai are also still in a protracted lockdown.
