China’s reopening fuels demand, adding to US inflation

China’s reopening after three years of on-and-off tight lockdowns to curb the spread of COVID-19 threatens to push inflation in the U.S. and elsewhere higher.

Economists predict that resurgent demand for commodities from China in 2023 will likely add up to a half percentage point to inflation in most economies. Oil demand alone, for example, will climb nearly 2% year over year to 101.7 million barrels per day, with half of the increase coming directly from China lifting COVID-19 restrictions, according to the International Energy Agency.

“The impact of China’s reopening would be largely on the demand side, which would contribute to a higher global inflation rate,” said Yating Xu, principal economist at S&P Global Market Intelligence.