China's factory inflation hits post-Covid high on Iran war cost shock

China's producer prices rose at their fastest pace since the post-Covid surge, official data showed on Monday, as the Iran war pushed energy costs sharply higher. The producer price index (PPI) climbed 4.6% in April from a year earlier, up from 3.1% in March and the highest since 2022, the National Bureau of Statistics said. Consumer inflation also picked up, with the CPI rising 1.8%.

Energy, raw materials and shipping accounted for nearly all of the producer-price gain. Brent crude has held above $90 a barrel since the war disrupted Persian Gulf exports, and shipping rates from Asia to Europe have climbed roughly 40% on Hormuz risk premiums. Beijing's plan to boost subsidies for fertilisers and household appliances has also fed into upstream price pressure.

The print sharpens a policy dilemma for the People's Bank of China. Officials had been preparing to loosen further to support consumption, but rising input costs are squeezing manufacturers' margins and risk feeding through to retail prices. Analysts said any easing now would likely come through targeted lending tools rather than broad rate cuts, and a stronger yuan is helping offset some import-cost pressure.