China’s factory gate prices exit deflation after Iran war shock

China’s producer price index (PPI) exited deflation in March 2026 for the first time since 2023, reversing a 27-month downturn amid geopolitical disruptions. The shift follows a surge in oil prices after Iran-Israel tensions escalated, triggering supply chain concerns and boosting industrial input costs globally. Factory output costs rose 0.2% year-on-year, driven by energy and raw material price spikes, signaling potential inflationary pressures in downstream consumer markets. Analysts attribute the rebound to both conflict-driven commodity shocks and Beijing’s stimulus measures, though sustained recovery hinges on stabilizing Middle East tensions. The PPI turnaround contrasts with lingering consumer price weakness, highlighting uneven economic momentum as policymakers balance growth and inflation risks.