Middle East War Triggers Higher Prices in China

Falling wholesale prices have plagued the Chinese economy. Thousands of manufacturers have had to sell their goods for less and less. Consumer prices have also stagnated in China and occasionally fallen, helping to depress wages.

The Bureau of Labor Statistics is scheduled to release consumer price data for the United States on Friday in Washington. Those numbers will be scrutinized for the extent to which the Middle East war may be affecting inflation and affordability in the United States. Rising prices in China can seep through to prices in the United States, because much of America’s supply of manufactured goods comes directly from China or indirectly, through countries like Vietnam and Mexico.

A broad fall in the price level across an economy, a phenomenon known as deflation, makes it hard for companies to pay their debts and their workers. Chinese policymakers have been so wary of deflation that they have banned the country’s economists from publicly discussing its dangers.

Producer prices rose 0.5 percent in March from a year earlier, led by increases in prices not just for fuel but also for aluminum. Producer prices fell 0.9 percent in February.

Because the increase in producer prices mainly involved higher prices for imported raw materials, however, the benefit for Chinese manufacturers’ profitability may be limited.…Read more by Keith Bradsher