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Finbarr Bermingham

China’s consumer price inflation rose sharply in March, as the country struggles to contain the impact of an African swine fever epidemic that has sent pork prices soaring.
Consumer price inflation (CPI) rose 2.3 per cent year-on-year, a large increase on February’s figure, when consumer prices rose by 1.5 per cent.
This was in line with than a poll of economists done by Bloomberg, which had predicted a 2.3 per cent rise.
According to the National Bureau of Statistics (NBS), which released the data on Thursday, African swine fever along with refined oil price adjustments were the main drivers behind the rise in CPI.




According to the NBS, pork prices have risen 5.1 per cent year-on-year, which has contributed 0.12 percentage points to the rising CPI.
“Due to seasonal reasons, fresh vegetable prices have gone up 16.2 per cent year-on-year, causing CPI to rise by about 0.42 percentage points,” the NBS statement added.
There were also price gains in non-food sectors such as health care, culture and education.
While state media reported on Tuesday evening that new cases of African swine fever are slowing, the pig livestock and pork production industries have been suffering amid the outbreak.

Pork companies have seen their share prices plummet, with WH Group – the world’s largest pork producer and the owner of Smithfield, the biggest American pork producer, seeing its net profit for 2018 fall by 4 per cent.
In a research note released on Thursday, analysts from Nomura wrote that “a new hog cycle started around mid-2018 and will continue for some time, with pork prices likely peaking in January 2020”.
Local media also reported that China has culled more than 1 million pigs due to swine fever cases.
Liang Zhonghua, chief macro analyst at the Research Institute of Zhongtai Securities, wrote in a note that China’s CPI would rise significantly this year due to the rising pork price. He suggested that CPI might break the 3 per cent mark in June.
Producer price inflation (PPI), meanwhile, rose 0.4 per cent, also in line with economists’ forecasts, and an increase on February’s figures, which had skirted dangerously close to deflationary territory, coming in at 0.1 per cent.
Should PPI enter negative territory, producers would be forced to offer wholesalers lower prices for goods and services, eating into profits and reducing firms’ ability to hire and invest.
This is a scenario Beijing has been eager to avoid, having previously suffered factory price deflation between 2012 and 2016. Such a scenario deters spend and investment, because of the expectation that prices will be cheaper in the future.
In month-on-month terms, factory gate prices rose for the first time in five months. However, this was almost entirely driven by a rise in the cost of raw materials, particularly oil. The price of manufactured industrial inputs and final consumption goods held steady.
Julian Evans-Pritchard
“In month-on-month terms, factory gate prices rose for the first time in five months. However, this was almost entirely driven by a rise in the cost of raw materials, particularly oil. The price of manufactured industrial inputs and final consumption goods held steady,” said Julian Evans-Pritchard, China economist at Capital Economics.
‘Looking ahead, we expect oil prices to fall back in the coming months. This will drag down PPI, though we expect the impact on CPI to be offset by a further rise in pork prices. Meanwhile, continued economic weakness is likely to keep a lid on broader price pressures.”


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Economic Indicators

Consumer price inflation rose 2.3 per cent year-on-year, a large increase on February’s figure, when consumer prices rose by 1.5 per cent
Producer price inflation rose 0.4 per cent, an increase on February’s figures, which had skirted dangerously close to deflationary territory, coming in at 0.1 per cent


China’s consumer price inflation rose sharply in March, as the country struggles to contain the impact of an African swine fever epidemic that has sent pork prices soaring.
