China’s inflation reaches 15 month high

INFLATION in China rose to its highest level in more than a year in May driven by surges in pork and fruit prices caused by the African swine fever epidemic and bad weather, official data showed on Wednesday.

But while prices are increasing, demand remains weak because of the trade war with the US and economic uncertainty.

The consumer price index – a key gauge of retail inflation – hit 2.7 per cent, the National Bureau of Statistics (NBS) said, compared with 2.5 per cent in April and the highest since February last year.

The data was in line with a forecast of analysts polled by Bloomberg News.

The rise was “largely the result of renewed acceleration in food price inflation”, and pork supply disruptions caused by African swine fever, Capital Economics said in a note.

Millions of pigs have been culled recent ly as t he disease cuts through China and beyond, devastating global food chains and impacting pork prices from the food markets of Hong Kong to US dinner tables.

The price of pork soared 18.2 per cent in May, China’s NBS said. The price of fresh fruit on-year was up 26.7 percent as bad weather hammered supplies.

Beijing’s official statistics say around one million pigs have been killed since the first outbreak in August – but that is widely considered to be an underestimate.

The producer price index, an important indicator of domestic demand, hit 0.6 per cent in May, from 0.9 per cent the previous month.

Economic “growth could slow further on escalating US-China trade tensions”, Nomura International said in a note.

“We expect Beijing to undertake further easing/ stimulus measures to bolster confidence and to stabilise growth.”