Inflation Concerns Due to Rising Producer Prices in China

The rapidly rising cost of raw materials has pushed up the prices that Chinese producers charge for their wares faster than those normally expected. This further fuels concerns about global inflation.

 

Producer prices in China rose by almost 7 percent in April compared to a year earlier. That was the fastest pace since October 2017, the Chinese statistics office reports. Compared to a month earlier, prices rose by 4.4 percent on average.

Consumer prices rose by less than 1 percent annually, compared to 0.4 percent a month earlier. Especially the lower pork prices this year compared to a year earlier put pressure on inflation.

There is a high demand and a shortage of supply for raw materials worldwide. That is fueling concern about inflation around the world. This is because China is the largest exporter in the world. Additional costs for factories are expected to be passed on to retailers, among others.

According to ING experts, rising factory prices result from a combination of domestic and international factors. For example, there is strong domestic demand for raw materials from infrastructure and real estate projects in China. Also, US President Joe Biden’s massive plan to tackle US infrastructure is fueling expectations of higher material prices.

In addition, according to ING, chip shortages are causing inflation to rise more sharply. In addition to the products in which chips are processed, it also concerns more straightforward products, which require chips to be produced.

Several producers worldwide are faced with disruptions due to the shortages of chips. According to experts, the prices of TVs, washing machines, laptops and cars, among other things, have already risen last month as a result of the shortages.