Consumer prices in China hit their highest level in two years

Customers buying pork at a food market in Shanghai, China. Prices for pork, a staple in China, rose 20.2% in July 2022 from a year ago, official data showed.

Qilai Shen | Bloomberg | Getty Images

BEIJING — China’s consumer price index hit a two-year high in July as pork prices rebounded, official data showed Wednesday.

Prices for pork, a staple in China, rose 20.2% in July from a year ago. This is the first increase since September 2020, according to official data accessible via Wind Information.

In fact, hog prices posted their biggest month-over-month rise on record — up 25.6%, the data showed.

Farmers’ reluctance to sell — hoping to get higher prices in the future – contributed to the surge in pork prices in July, Bian Shuyang, agricultural commodities analyst at Nanhua Futures, said in a statement.

Looking ahead, Bian expects it to be difficult for pork prices to rise above July levels.

Two Chinese holidays in September and October will help support consumer demand for pork, Bian said.

According to the analyst, live hog producers are now operating at a profit, a sign of greater supply to come.

Hog prices have risen dramatically over the past three years as hog farmers struggled with deadly diseases and many new producers.

Prices for fresh fruits and vegetables also jumped in July, up 16.9% and 12.9% respectively from a year ago, according to the National Bureau of Statistics.

Ex-fall in food prices

As food prices rose, Wednesday’s inflation data continued to reflect lackluster demand in China’s economy.

The headline consumer price index rose 2.7% in July, missing expectations of a 2.9% increase, according to analysts polled by Reuters.

The Covid epidemics in many cities and the absence of new stimulus measures may have led to weaker growth in July.

Zhiwei Zhang

Chief Economist, Pinpoint Asset Management

“Non-food prices actually fell in July [by 0.1%] compared to their June level, which reflects weak demand,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said in a note.

“The Covid outbreaks in many cities and the lack of new stimulus may have led to weaker growth in July,” he said.

Despite the summer holidays, the tourism price component rose only 0.5% in July compared to a year ago.

Covid outbreaks in recent weeks have disrupted holidays with canceled flights and site closures in tourist spots ranging from Hainan Island to the Tibetan Plateau.

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China’s CPI print for last month was still the highest since July 2020, when the index also rose 2.7%, according to data from Wind.

China’s inflation data is well below that of the United States, which is expected to release its consumer price index data overnight. Economists polled by Dow Jones expect the US consumer price index to rise 8.7% in July from a year ago, down from 9.1% in June.

Wednesday’s data showed that Chinese producer prices continued to moderate, also coming in below expectations.

The 4.2% year-on-year increase reported for July fell short of the Reuters poll’s forecast of 4.8% growth.

“The decline in PPI inflation also indicates limited upside potential for CPI inflation” in China, Nomura’s chief China economist Ting Lu said in a note.

– CNBC’s Patti Domm contributed to this report.

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