BEIJING (Reuters). -China’s factorygate and consumer price rose quicker than expected in March. This was due to Russia’s invasion Ukraine. Continuing supply chain bottlenecks, production snags and COVID flare ups all contributed to the commodity cost pressures.

Global economies are being hampered by rising raw material costs. Analysts have raised concerns about how China’s central banks will ease their monetary policy.

The National Bureau of Statistics (NBS), Monday’s data showed that China’s producer prices index (PPI), rose 8.3% over the past year. Although it was lower than February’s 8.8%, this beat the 7.9% increase forecast in a Reuters poll.

The consumer price rise of 1.5% per year was driven by upstream pressures. It is the fastest increase in three months and faster than 0.9% seen in February. That beats 1.2% expectations.

Analysts at Nomura said that delays in crop production due to new COVID-19 strains in Ukraine and other conflicts could lead to new pressures on food prices in the second half.

Nomura wrote in a note, “Rising food price and energy inflation limits the space (People’s Bank of China), to reduce interest rates. This is despite the rapidly improving economy.”

The year-on-year PPI increase was slower than April 2021. This was due in part to lower comparisons between late 2020 and 2021 that were seen in previous months.

According to an NBS statement, the 1.1% monthly rise was also the most rapid in five months. This is due to rising prices for domestic oil and nonferrous metals, which are influenced by geopolitical factors.

Oil and gas extraction prices grew 14.1% on month, and petroleum，coal and other fuel processing prices rose 7.9%.

According to Wang Jun (chief economist, Zhongyuan Bank), the uncertainty surrounding Ukraine will have an impact on global goods supplies, adding more inflation pressure for China.

NEW RISKS

In March, the world’s second largest economy was under pressure due to renewed COVID-19 epidemics. The manufacturing and services sectors reported declines in activity.

There are several policies that the government is implementing to help support the economy. They include greater fiscal spending, and lower income taxes for small businesses.

Although consumer prices are rising, the inflation rate is still low compared to global benchmarks. This could be due to Beijing’s COVID strict control measures.

Food prices dropped 1.5% compared to a year earlier. This resulted in 0.28 percentage points of headline CPI inflation.

China has reported 26411 new cases of asymptomatic disease for Sunday. This is more than the 25,000 that were recorded in Shanghai’s financial center. The city is currently locked down.

Iris Pang is chief economist for Greater China for ING. She expects Shanghai’s economy to shrink 6% in the next month if the lockdown continues. This would result in a 2% decline of gross domestic product for China.

Sheana Yue from Capital Economics, China Economist, stated that “although the prices of certain goods will continue to rise in the short-term,” but she believes inflation will stay contained. This will allow the PBOC more room for policy adjustment.”

Most analysts believe that the PBOC would reduce borrowing costs. They also expect to cut bank reserve requirements and lower the interest rates to inject more money into the economy.