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Home / Business / Consumer inflation is rising due to high pork prices

Consumer inflation is rising due to high pork prices



Pigs in the stable on a farm on the outskirts of Chengdu in Sichuan province in southwest China on August 2, 2005.

Peter Parks | AFP | Getty Images

China's producer prices fell the hardest in more than three years in October, as manufacturing decelerated due to declining demand and a setback from the Sino-US Customs War, reinforcing the demand for continued stimulus from Beijing. [19659002] The Producer Price Index (PPI), which is considered a key indicator of corporate profitability, fell 1

.6% yoy in October, the largest drop since July 2016, according to National Bureau of Statistics (NBS) data. showed on Saturday. Analysts had reported a PPI decline of 1.5%.

In contrast, China's consumer prices rose at their fastest pace in almost eight years, mainly due to an increase in pork prices as African swine fever had hit the country's herds to launch demand-support measures.

The pressure on core inflation – without food and energy prices – remains moderate.

Factory deflation is in line with other indicators indicating a decline in production activity in October, with the official PMI (PMI) indicating a decline for a sixth straight month.

While Washington and Beijing are completing the first part of a gradual trade agreement, many analysts are concerned about the sudden collapse of earlier talks in May. Chinese manufacturers will continue to be under pressure from existing tariffs.

More US tariffs on China are due to come into force on December 15, although officials from China and the United States this week said they had agreed to reset the tariffs on each other's goods if one "Phase 1" trade is completed.

However, on Friday, President Donald Trump said he had not agreed to China's rollbacks.

The more than a year-long trade war has cost China $ 35 billion as the United States cut Chinese imports and increased prices for American consumers, according to a United States study published Tuesday.

For the first time since 2016, China lowered the interest rate on its one-year medium-term loan (MLF) loan. However, the Chinese authorities were relatively reluctant to provide incentives and the cut was only 5 basis points.

However, rising consumer inflation is adding concern to policymakers as the world's second largest economy slows to a low of 6% to 6.5% in 2019.

The Consumer Price Index (CPI) rose 3.8% yoy in October, the highest since January 2012, and exceeded analyst expectations of 3.3%.

The increase was mainly due to a sharp increase in pork and other meat products after African swine fever had killed a large proportion of Chinese pigs. According to the statistics office, pig prices more than doubled in October compared to the previous year.

"Although we expect the People's Bank of China (PBOC) to maintain its easing policy, we believe that the risk of a pay-price spiral is increased with rising pork prices and the impact on other food prices," Nomura's analysts noted November 1st.

"As a result, PBOC may be reluctant to set major policy incentives in the coming quarters in order not to fuel inflation expectations," the analysts said.


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