Rising pork prices provide inflation scare

The death of millions of pigs, possibly due to rare blue ear disease and an outbreak of foot-and-mouth disease, drove pork prices up 30% this past week, the Financial Times reported. According to the Ministry of Agriculture, wholesale prices for pigs have gone up even more, rising 71.3% since April. "The surge in pork prices will likely push the year-on-year CPI [consumer price index] inflation to above 4% very soon," said Hong Liang of Goldman Sachs in Hong Kong. In addition, the price pressures of meat, which makes up about 7% of the CPI basket, could spread to eggs, fish and other food products. In an effort to alleviate inflated pork prices, the government plans to tap into its "strategic pork reserve", established in the late 1990s to sell to local farms, according to Li Xizhen, the Ministry of Commerce. Although 4% CPI inflation is above the central bank's unofficial tolerance rate of 3%, core inflation remains low.