China’s economy was losing momentum in the first quarter, even before the full impact of Russia’s invasion of Ukraine on commodity prices and global supply chains was felt.

The country’s central bank warned about the “triple pressures from shrinking demand, supply shocks and weakening expectations” in its quarterly review of monetary policy published on March 30.

Policymakers blamed the increasingly severe and uncertain environment on the continuing epidemic overseas, escalating geopolitical conflicts, and the increasing frequency of domestic coronavirus outbreaks.

In the first quarter, the bank’s regular survey of 5,000 enterprises nationwide found both domestic and export orders shrinking at the fastest rates since epidemic’s first wave two years ago and before that early 2016.

The domestic orders index fell to 41.4, while export orders fell to 40.9, both well below the 50-point threshold that divides expanding activity from a contraction. (https://tmsnrt.rs/3qMOs6D)

In response, the central bank has pledged to boost confidence, provide stronger support to the real economy and stabilize major economic aggregates, underscoring the depth of the slowdown.

But China’s business cycle downturn has taken a little of the heat out of commodity markets being severely disrupted by the conflict in Ukraine.

If China’s manufacturers and service-sector businesses were not struggling, it is likely oil and other commodity prices would have soared very much higher already.

Escalating prices for raw materials, supply chain problems caused by Russia’s invasion and the sanctions imposed in response, and heightened business and household uncertainty now threaten to make the downturn worse.

For commodity markets, the critical question is whether the slowdown will be prolonged and sap consumption growth through the rest of the year, injecting some slack into the system.

Or whether a fresh cyclical upturn in the world’s largest commodity importer will tighten markets even further later in 2022 and into 2023, intensifying inflationary pressures.

(John Kemp is a Reuters market analyst. The views expressed are his own.)