China just exited its longest factory deflation on record: China’s producer prices (PPI) rose +0.5% YoY in March, above the +0.4% expected, ending more than 3 years of factory-gate deflation. MoM, PPI increased +1.0%, the largest monthly increase since August 2022. Surging energy costs and commodity prices drove the reversal after the Iran War disrupted global energy supply, with China gas prices up +25% since the war began. This comes after 41 consecutive months of falling producer prices as a manufacturing oversupply and weak demand led to intense price wars that eroded profits and slowed wage growth. Meanwhile, China's CPI inflation came in at +1.0% YoY, marking the 7th consecutive month of positive consumer price growth. It took the shock of war to break China’s deflation.(The Kobeissi Letter)