Jan 09, 2020 08:19 PM

Update: Consumer Inflation Remains at Eight-Year High in December

Increased supplies of pork helped rein in prices of China’s most-consumed meat in December, ending a three-month acceleration in inflation that had taken the consumer price index (CPI) soaring above the government’s 3% target ceiling.

The CPI, which measures the prices of a basket of consumer goods and services, rose 4.5% last month year-on-year, data from the National Bureau of Statistics (NBS) showed Thursday, the same rate as in November which was an eight-year high. The index has been driven higher for months by surging pork prices caused by a nationwide outbreak of African swine fever.

December’s inflation rate, which was slightly lower than the median estimate of 4.6% (link in Chinese) in a Caixin survey of economists, has more than doubled from 1.9% over the past year as the swine fever epidemic devastated China’s hog population leading to a shortage that sent wholesale fresh pork prices surging to a peak of 52.3 yuan ($7.5) per kilogram in November from 19.2 yuan a year earlier.


The CPI growth in December was mainly driven by food prices, which rose 17.4% year-on-year and accounted for 3.4 percentage points of the inflation rate, NBS statistician Shen Yun said in a statement (link in Chinese). Pork was responsible for most of the increase, soaring 97% year-on-year and accounting for just over half the overall CPI gain, NBS data showed. But the surge in prices moderated from a year-on-year pace of 110.2% in November.

But with the pressure on pork supplies now easing as a result of government policies to boost imports, release reserves and encourage farmers to raise hogs, the worst of the price frenzy appears to be over. On a month-on-month basis, average pork prices fell 5.6% in December, compared with a 3.8% rise the previous month, NBS data showed.

However, economists at Nomura International estimate that wholesale pork prices will rise further in January due to the ongoing spread of African swine fever, the near-term unavailability of an effective vaccine and the impact of the upcoming Lunar New Year holiday which could drive another spike in demand for pork.

They project the CPI will rise by 5.3% year-on-year in January, hover above 4% in the first half this year, and then drop to around 2% towards January 2021.

For the whole of 2019, China’s CPI rose 2.9%, up from the previous year’s increase of 2.1% growth (link in Chinese) and the highest annual gain since 2011.


Core CPI — which excludes the more-volatile food and energy prices and which economists say better reflects long-term inflation trends — rose by a more modest 1.4% year-on-year in December. The reading was the same as the previous month and was the slowest in more than three years. Even so, non-food inflation picked up strongly in December, rising 1.3% year-on-year from 1.0% the previous month. It was the biggest increase since June 2019, driven by rising prices of oil, consumer goods and residence costs including utilities.

Deflation in producer prices eased in December, with the producer price index (PPI), which gauges changes in the prices of goods circulated among manufacturers and mining companies, narrowing its decline to 0.5% year-on-year in December from a 1.4% drop in November, NBS data show. Analysts at Capital Economics and Goldman Sachs attributed the smaller drop to base effects and an increase in oil prices.

Economists at Nomura forecast PPI inflation could rise to around 0.3% year-on-year in January due to low base-effect comparisons with early last year when global oil prices fell sharply. China is the world’s top importer of the fuel and prices have risen sharply in recent weeks. The PPI has been in negative territory since June 2019.

The December PPI and CPI readings show “demand-side pressures remain subdued, leaving ample space for policymakers to ease monetary policy,” Capital Economics analysts wrote in a research note.

Many analysts are expecting the central bank to further ease monetary policy this year to counter an economic slowdown after it lowered banks’ reserve requirement ratios (RRRs) and some lending rates last year. On Jan. 6, the People’s Bank of China cut banks’ RRRs by 50 basis points, releasing about 800 billion yuan of liquidity into the financial system.

Contact reporter Tang Ziyi (

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