Chinese Consumer Inflation Waiting for a Pork Spark

Chinese 12-month inflation readings rose in March thanks to deflationary numbers dropping out of the readings. Producer prices increased 0.1 percent and consumer prices fell 0.4 percent in March. The 12-month PPI and CPI climbed to 0.4 percent and 2.3 percent. The latter was a jump from 1.5 percent as a big price drop in March came out of the calculation.
There was no "porkpocalypse" in the CPI or PPI. In the CPI, pork prices increased 1.2 percent in March and 5.1 yoy, and fell 1.2 percent in Q1 (yoy comparison). Beef, lamb and egg prices declined in March (no substitution effect). Lamb is up the most at 9.7 percent yoy and 11.0 percent in Q1. The broader food, alcohol and tobacco category fell 0.6 percent in March, but rose 2.2 percent in Q1 from 2018's Q1.

Takeaway: Chinese consumer inflation is running hot, and there's no sign of a hit from the African swine flu that has nonaginated China's supply. Rising pork prices are not inflation, but the public doesn't care. The government will have to deal with rising inflation expectations if pork prices take off.

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