16 October 2019 09:55
According to People, George, Charlotte, and Louis are being cared for not only by their trusted nanny but also by their grandparents, Mike and Carole Middleton, who have taken a very active role in attending to the children while their parents fulfill their royal travel obligations. China's consumer inflation hit its highest level in nearly six years last month as pork prices continued to soar on disruptions to supply caused by the African swine fever crisis. The consumer price index (CPI), which measures the prices of a select basket of consumer goods and services, edged up 0.2 percentage points to a 3% year-on-year rise in September, according to data (link in Chinese) released Tuesday by the National Bureau of Statistics (NBS). The reading has not been this high since November 2013 (link in Chinese) and exceeded the average forecast of 2.8% growth by a Caixin poll of economists. The average pork price rose 69.3% year-on-year in September, up from 46.7% the previous month and the fastest growth since August 2007.
The Chinese government released 30,000 tons of pork from state reserves to ease pressure on supply in September, according to (link in Chinese) the Ministry of Commerce. The substantial CPI growth does not suggest an uptick in domestic demand, however, as core CPI — which excludes more-volatile food and energy prices and which economists say better reflects long-term inflation trends — remains at a more than three-year low of 1.5% growth, NBS data shows. Last month, China's producer price index (PPI), which tracks the prices of goods circulated among manufacturers and mining companies, declined 1.2% (link in Chinese) year-on-year due to falling oil and raw material prices, a further drop from its 0.8% contraction in August, according to NBS data. In the view of ANZ Research economist Xing Zhaopeng, the widening divergence between China's CPI and PPI growth stems from supply-side reforms which have reduced supply and caused some prices to surge, while prices in downstream sectors have remained relatively stable. Economists from Nomura International (Hong Kong) Ltd. predicted in a note that consumer inflation would remain above 3% in the coming months on higher pork prices while the PPI would turn more negative on weakening domestic demand, falling energy prices, and other factors.
"We continue to anticipate further loosening in the next few quarters as demand-side pressures remain muted and factory-gate deflation deepens," Martin Lynge Rasmussen, China Economist at Capital Economics, wrote in a note. PPI deflation could deepen due to weakening domestic demand, falling energy and raw material prices and the value-added tax cut that became effective in April this year, analysts at Nomura said. Chinese central bank governor Yi Gang said late in September there was no urgent need to implement large interest rate cuts following Beijing's reiteration that it would not use "flood-like" stimulus measures. Data released by NBS Tuesday showed China's consumer price index (CPI) rose 3% from a year earlier, higher than 2.9% tipped by analysts and marking the fastest increase since October 2013, when it rose 3.2%. While September's data showed headline inflation at China's official target of around 3% and core CPI growing a benign 1.5%, food costs continue to soar, driven mainly by rising pork prices as African swine fever diminishes hog supplies.
Chinese policy makers are facing a rising divergence in inflation, with surging food prices pushing up what consumers pay, while deflation has returned to the industrial sector, hurting profits and making debt repayment more difficult. With CPI rising 3%, a tentative trade war truce agreed Friday, and policy makers' desire to to curb debt and financial risks, there may be only a "measured dose" of stimulus, according to Michelle Lam, greater China economist at Societe Generale SA in Hong Kong. Given the spread of African swine fever, a sharper contraction in hog stock and pork production, and limited room to increase hog and pork supply, pork prices will trend higher in coming quarters, said Lu Ting, chief China economist at Nomura International Ltd. in Hong Kong. That fever and subsequent slaughter of millions of pigs has pushed up prices, but breeders are unlikely to rush to restock their herds in a meaningful way over fears of catching the disease again, Feng Yonghui, chief analyst with industry portal www.soozhu.com, said at a conference last month. The return to PPI deflation since July is not only acting as a drag on manufacturing investment, already under stress from U.S.-China trade tensions and supply-chain relocation, but also poses a major risk for onshore corporate debt refinancing, Bo Zhuang, chief China economist at research firm TS Lombard, said before the inflation data. Sustained PPI deflation, where the monthly rate remained below -2% for more than three to six months, would be a likely catalyst for the reversion to old-style credit stimulus, he said. The CPI will stay above 3% in coming months, and could rise to close to 4% in January when the Lunar New Year holiday falls, according to Nomura's Lu. Producer price inflation may fall even more due to weakening domestic demand, falling energy and raw material prices and the value-added tax cut that became effective in April this year, he said.