China Inflation Cools As Pig Price Pressures Ease

By Glenn Dyer | More Articles by Glenn Dyer

China ended 2019 with more signs that the pork-driven surge in consumer inflationary pressures is easing, while producer deflation again eased in December.

Data out late last week from the country’s national statistics bureau showed China’s consumer inflation rose by 4.5% from a year earlier in the last month of the decade.

For the year, China’s CPI increased by 2.9%, within the official target range of 3%. Reuters has reported that the 3% target is being maintained for 2020.

The core inflation rate was unchanged at 1.4% in December, falling from 1.9% last January. That’s further confirmation that price pressures are not a threat to the economy.

That was unchanged from the annual rate in November which was the highest since January 2012, and under market forecasts around 4.7%.

Pork prices again drove prices – the cost of pork was up 97% from 2018, but that was well under the 110% surge reported in the year to November. Economists say there are more signs of an easing in the dramatic impact of African swine fever is having on pig numbers in China which is taking pressure off prices.

Food prices rose by 17.4% in December thanks to the rise in pork prices from a year earlier. Prices for beef, mutton, chicken, duck, and eggs rose between 7.3% and 20.4% thanks to higher demand for meats other than pork; while vegetable prices were also up 10.8%

Non-food prices rose 1.3%, while consumer goods prices rose 6.4% and services prices rose 1.2%.

While China’s producer price index contracted for a sixth consecutive month, the pace of fall continues to slow sharply. The PPI shrunk 0.5% year-on-year in December, from the 1.4% slide in November and the most recent peak of a 1.6% fall in October.

“Moderating food price inflation took the pressure off consumer price inflation while producer price deflation eased thanks to base effects and an increase in energy prices.

“The big picture is that demand-side pressures remain subdued, leaving ample space for policymakers to ease monetary policy,” Julian Evans-Pritchard, senior China economist from Capital Economics said in a commentary.

The price pressures will be boosted this month because of the early Lunar New Year on January 25. With pork the most popular food and in short supply, prices will remain elevated.

The recent rise in oil prices might also add to pressures in the next couple of months but there are signs oil prices are now easing.

China’s December and 2019 yearly data continues to be released this week with trade data on Tuesday, house prices on Thursday and the quarterly and annual GDP report on Friday.

Some sort of trade deal between the US and China is expected to be signed later this week (Friday in Washington, at this stage).

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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