China Avoids Inflationary Effects of Russian War Thus Far
Washington, DC, March 9, 2022-Rising energy prices in the run-up to Russia’s invasion of Ukraine added to Chinese inflation in February, an early sign of the pressures building in the global economy as the war sends commodity prices soaring, reports the Wall Street Journal.
“Producer-price inflation slowed in China in February, to 8.8% from a year earlier, versus a 9.1% rate in January and a peak of 13.5% in October. Consumer prices rose at the same 0.9% annual pace as a month earlier.
“At the same time, prices charged by companies at the factory gate rose on a month-to-month basis for the first time since October, while the monthly pace of consumer-price inflation also picked up, data from China’s National Bureau of Statistics showed Wednesday. Producer prices rose 0.5% in February compared with January, while consumer prices rose 0.6%.
“Behind the uptick were rising prices for energy and metals, a reflection of investor unease ahead of Russia’s invasion of Ukraine last month. Since Russia invaded in the final days of February, energy and commodity prices have exploded as the U.S., the European Union and others responded with crippling sanctions that threaten to choke off Russian supplies of oil, gas, metals and fertilizer to the rest of the world.
“The full effects of Russia’s invasion on inflation have yet to be felt, in China and elsewhere. Policy makers and economists expect surging prices for gasoline, food and other necessities will hurt consumer spending and weigh heavily on growth, especially in Europe. That inflation will also complicate the task of central banks that are seeking to balance intensifying price pressures with incomplete pandemic recoveries.
“Federal Reserve Chairman Jerome Powell told lawmakers last week that he would propose a quarter-percentage-point rate increase at this month’s policy meeting, effectively ending speculation about a larger rate rise in the U.S. as the war upends the outlook for growth and worsens the picture for inflation.
“China, the world’s second-largest economy, is in a different position. Domestic inflationary pressures are subdued because of pandemic-related restrictions on movement, which have curbed consumer demand. Chinese consumers are also less exposed than their Western counterparts to swings in global energy and commodity prices.”