China inflation flattens as surge in pork prices slows

BEIJING, China – Chinese consumer inflation stabilized at an 8-year high in December 2019, data showed Thursday, January 9, as the rise in the cost of pork slowed after authorities dipped into the nation's reserves to battle the impact of African swine fever.

The consumer price index (CPI), a key gauge of retail inflation, has been consistently rising over the past year as the disease ravages pig herds across China, leading the price of pork – the country's staple meat – to more than double.

However, with the Lunar New Year break at the end of January a peak time for pork consumption, Beijing has released more than 100,000 tons since the middle of last month to ease the strain on supplies.

The CPI came in at 4.5% last month, the same as November and slightly below the 4.7% forecast in a survey by Bloomberg News.

For the full year of 2019, consumer prices rose 2.9%.

OCBC Bank's head of Greater China research Tommy Xie told Agence France-Presse he expects prices to soften slightly in 2020, although pork prices are likely to remain elevated for the 1st half of the year.

"But there is a chance for prices to go down in the 2nd half, because of a higher base of comparison," he said, referring to higher pork prices in 2019.

Pork prices rose 97% on-year in December, much slower than the 110.2% rally seen in November, while they were down 5.6% on-month.

"With positive changes in hog production, a release of pork from central and local reserves to the market, as well as a rise in imports, the pork supply situation has eased slightly," the National Bureau of Statistics said. 

Julian Evans-Pritchard, senior China economist of Capital Economics, said: "Pig supply jumped by the most in a decade last month, adding credibility to official statements that African swine fever has come under control."

China's pork supply has been hammered since swine fever began to spread in August 2018, with vice agriculture minister Yu Kangzhen saying on Wednesday, January 8, the situation remains "severe and complex."

But some expect prices to spike again after the New Year break – with disease still ravaging the industry and farms likely wary of restocking their herds.

The producer price index, an important barometer of the industrial sector that measures the cost of goods at the factory gate, fell 0.5% in December from a year ago, more than the 0.4% drop forecast. (READ: Pork from China caused African swine fever outbreak in Philippines– Rappler.com