Predictably, Chinese inflation in March – which remained stable in January and February – rose above expectations by 1.5% on an annual basis. The National Bureau of Statistics (Nbs) points the finger at the cost of raw materials and the increase in outbreaks that have so far led to a two-week lockdown in Shanghai, while at the end of the weekend the port of Guanghzhou has also closed for arrivals to avoid new infections. The index, after remaining unchanged at 0.9% for two months in a row, surpassed economists’ estimates at + 1.4%.
The effects of the quarantine
As it tries to cope with the new outbreaks, China is virtually isolated, unprepared to live with the virus. Rising cost of living is a predictable effect even as inflation weighed less on food, which fell by 1.5% yoy in March, compared to a 3.9% decline in February, contributing to a 0.28 percentage point drop in the CPI.
The situation is critical. The new spike in Chinese Covid cases is combined with the rise in the yield on 10-year Treasury bonds in the US, at the highest since 2019, above the equivalent rate on Chinese debt, weighing on Asian stock exchanges, which recorded a decline. The MSCI index lost more than 1.5%.
The fact that China’s March consumer and factory prices rose beyond expectations also reflects global uncertainties over the war in Ukraine and fears of the Fed’s more aggressive policy, coupled with high inflation imported from the West.
Guangzhou also closes
Criticalities spread throughout the country. Guangzhou closes most of the arrivals with the rise of the Chinese epidemic in front of a few dozen confirmed cases.