Soaring factory prices in China add to global inflation fears

ERIC ZHU, an international sales manager at a Chinese forklift-maker, has just sent his second letter of the year to customers, explaining that prices are going up once again. “We need to share some of the price increases with our partners. We cannot absorb them all ourselves,” he says. “The world is crazy now.” Although not standard economics terminology, crazy is a good description for the price movements now coursing through global markets. Inflation in America is running at its fastest since 2008. Energy and commodity prices have soared. And as Mr Zhu can attest, investors and company bosses are worried that China, the world’s workshop, is itself starting to export inflation.It is easy to see why people are concerned. On June 9th China reported that factory-gate prices rose at an annual rate of 9% in May, the highest in more than a decade. That, along with soaring shipping costs and a stronger yuan, will probably push up the prices of made-in-China goods, from phones to futons. America’s imports from China already cost 2.1% more in April than they did a year ago, the fastest rise since 2012 (see chart).