China inflation pushes higher as pork prices jump

Inflation pushed higher in China last month, official data showed on Friday, after a sharp increase in food prices.

The National Bureau of Statistics said consumer price inflation rose by 2.8% in September, against 2.5% in August and largely in line with consensus. It was the sharpest rise since April 2020, when CPI jumped 3.3%,

One of the biggest drivers behind the hike was food inflation, which increased to 8.8% year-on-year from 6.1% in August. Pork inflation surged to 36.0% from 22.4% a month earlier, supported by rising holiday demand and lower slaughter rates. Pork is a staple food in China.

Once the more volatile elements of food and energy were stripped out, however, CPI rose by just 0.6%, compared to 0.8% a month previously. Services inflation, impacted by Beijing’s zero-Covid policy, fell to 0.5% from 0.7%.

Producer price inflation, meanwhile, eased to 0.9%, below consensus for 1.0%, from 2.3% a month previously. It was the slowest growth since January 2021. The biggest drag was mining PPI, which tumbled to 3.5% from 10.1%.

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "For now, wholesale pork prices continue to climb, but we will need a much larger increase to sustain the September inflation rate. We expect inflation to pull back in October.

"We expect PPI inflation to trend lower as we head into the year-end, and think outright deflation is likely by the first quarter of 20223. Where PPI leads, Chinese export prices tend to follow, so China will be helping the fight against inflation elsewhere."