China inflation jumps to six-month high as African swine fever drives up pork prices
- Consumer prices rise to 2.5 per cent in April, up from 2.3 per cent in March, as pork prices jump 14.4 per cent, according to the National Bureau of Statistics
- Producer price inflation rises to 0.9 per cent in April compared to a year earlier, up from 0.4 per cent in March, and above the median 0.6 per cent gain predicted
China’s consumer inflation climbed to its highest level in six months in April because of soaring pork prices, with the nation increasingly feeling the effects of the African swine fever epidemic.
Since officials began reporting cases of African swine fever in August, the disease has led to the culling of hundreds of thousands of live pigs and breeding stock to stop the spread of the virus that is deadly to pigs but does not affect humans. Experts believe there are far more cases than the 129 outbreaks officially reported in all provinces and autonomous regions of the country, devastating the pork industry.
To make matters worse, China has blocked imports from two Canadian pork producers, Olymel and Drummond, since April after police in Vancouver arrested Huawei chief financial officer Meng Wanzhou at the request of the United States for violating sanctions against Iran. Pork imports from the US have also been heavily restricted by tariffs of 62 per cent on frozen pork and 70 per cent on fresh pork.
In addition to higher pork prices, the NBS said that fruit prices surged 11.9 per cent after last year’s poor harvest in the northern region that caused a drop in supplies.
Meanwhile, China’s factory-gate inflation rose faster than expected last month because of higher commodity prices and the effect of government stimulus programmes that ramped up infrastructure spending alongside tax cuts to support demand.
The NBS said producer price inflation accelerated to 0.9 per cent from a year earlier in April, up from 0.4 per cent in March and above the median 0.6 per cent gain predicted in a Bloomberg survey of economists.
Among major industries, prices in the oil and gas exploration industry expanded 10.1 per cent; oil, coal and other fuel processing industries rose 4.2 per cent; while the non-metallic mineral products industry increased by 3.7 per cent. The ferrous metal smelting and rolling processing industry gained 2.4 per cent.
Larry Hu, economist at Macquarie Bank, said before the release of the data that he was more concerned over the sluggish economic outlook than the impact of rising pork prices on monetary policy because policymakers typically use supply measures to respond to food price shocks.
Furthermore, the producer price index and property prices could be weighed down by the scaling back of the shantytown renovation programme which is due to be cut in half to 2.85 million units this year from 5.80 million last year, Hu said.
Economists at Nomura International, led by chief economist Ting Lu, predicted that inflation could rise above 3 per cent later this year, but that higher prices would not change the central bank’s easing bias because of the renewed risks to growth from higher US trade tariffs.
“We believe a double dip of growth is a real risk, and Beijing can’t afford to stop easing yet. The sudden escalation of US-China trade tensions and the recent sharp drop in stock prices could convince Beijing to undertake further easing measures to bolster confidence and to stabilise growth,” Nomura said.
Analysts expect the central bank to adopt further targeted easing measures to offset the negative impact of renewed US-China trade war tensions, although the central bank is unlikely to adopt a “flood-like” stimulus that could worsen the country’s mounting debt risks, they said.