China Economic Review

Rising food prices push up inflation in China

Consumer inflation accelerated in China last month following a bout of unforeseen agricultural disruptions, including the outbreak of African swine fever in several provinces.

The headline consumer price index increased to 2.3% year-on-year (y/y) in August from 2.1% in July, driven largely by a pick-up in food price inflation from 0.5% y/y to 1.7%.

The main driver was a significant jump in pork prices as outbreaks of African swine flu from farms across China continued to make headlines. Thirteen cases of the disease have now been confirmed in six geographically unconnected provinces. State officials have reportedly culled some 40,000 hogs to contain any further spread of the fever.

Also pushing up prices in August was the fallout from severe flooding in the eastern province of Shandong, sometimes known as China’s “home of vegetables” due to its large agricultural sector. The extreme weather has taken its toll on the country’s crop-growing outlook and pushed up vegetable prices by 9.0% y/y.

Producer prices grew at 4.0% y/y, the change coming from consistently high oil and steel prices. This was a month-on-month increase from July but a slight softening on a yearly basis due to a high base for comparison during last year’s second half.