China's May Producer Prices Highest in Nearly 4 Years
By Reuters | 09 Jun, 2026

Rising cost pressures from the Middle East conflict raised consumer prices and are expected to squeeze corporate profits, further weakening domestic demand.

China's producer prices rose for a third straight month in May to the highest since July 2022, while consumer prices stayed elevated as global energy prices pile cost pressures on manufacturers and drive up costs of living for households.

Rising cost pressures from the Middle East conflict could squeeze corporate profits and further subdue domestic demand, challenging policymakers' efforts to boost household consumption and deepening China's reliance on exports as a growth driver.

The producer price index (PPI) rose 3.9% from the previous year, National Bureau of Statistics (NBS) data showed on Wednesday, beating the forecast for a 3.8% increase in a Reuters poll. The rise was steeper than the 2.8% increase in April.

Compared with the previous month, PPI increased 0.5%, less than a 1.7% rise in April.

The surge in factory-gate inflation in May was driven by rising commodity prices and improved demand in certain industries, the NBS said in a statement.

Energy prices have soared since the United States and Israel launched attacks on Iran in late February, and cost pressures are likely to persist as the effective closure of the Strait of Hormuz continues to disrupt oil and gas flows from the Gulf. Resumption of the flows will take time even after the waterway reopens.

The energy-induced price shock has helped lift China's producer prices out of a years-long deflationary streak, as the year-on-year PPI reading turned positive in March for the first time since September 2022. Policy efforts to raise prices, including a government campaign to curb corporate price-cutting, had previously only eased deflation.

But the mismatch between supply and demand in China's economy may worsen as rising costs of living dampen already lukewarm household appetite for discretionary spending.

Consumer prices in May rose 1.2% from a year earlier mainly on rising gasoline, gold jewellery and services prices, according to the statistics bureau. The gauge recorded a 1.2% gain in April and economists had expected a 1.3% rise for May.

Food prices were down 1.7% on year, with pork prices dropping 16.1%.

Since the start of the Iran war, Beijing has lifted diesel retail prices by 1,530 yuan ($225.89) per metric ton and gasoline prices by 1,590 yuan per metric ton, after factoring in the most recent price cuts last week. China's gasoline and diesel consumption dropped 13% year-on-year in May after falling by around 16% the previous month, OilChem data showed.

Domestic car sales slumped, with the number of vehicles sold dropping 22.3% in May and 19.7% in the first five months, China Passenger Car Association data showed. The downturn mainly reflects a hit to gasoline car sales due to oil price hikes linked to the Middle East crisis, said Cui Dongshu, the association's secretary-general.

Core CPI, which excludes volatile ​food and fuel prices, rose 1.1% from a year earlier.

On a monthly basis, CPI edged down 0.1%, matching expectations and compared with a 0.3% rise in April.

($1 = 6.7733 Chinese yuan)

(Reporting by Yukun Zhang and Liz Lee; Editing by Jacqueline Wong)