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Prices of Pork Stoking Inflation Fears

by 5m Editor
9 August 2010, at 9:27am

CHINA - Pork prices are on the rise again, putting pressure on inflation, the official Xinhua News Agency reported Saturday, 7 August.

Prices of pork, which accounts for around 3 percent of China's Consumer Price Index (CPI), grew by 0.1 per cent Saturday compared to a day earlier and by around 17 per cent compared to June. The increase in food prices, which accounts for about a third of the index, has been blamed on bad weather.

According to the National Bureau of Statistics (NBS), China's CPI rose 2.9 per cent compared to the same time last year. The index rose a year-on-year 3.1 per cent in May, 2.8 per cent in April and 2.4 per cent in March.

The National Development and Reform Commission (NDRC), the country's top economic planner, predicted that the CPI would maintain 3 per cent for the rest of the year and would drop in October.

NBS said China's producer price index (PPI), measuring industrial products prices, increased 6.4 per cent in June and 6 per cent in the first half.

"PPI hit a record high in the second quarter and started declining. The CPI will peak in the third quarter," said Li Huiyong, chief macro-economy analyst with Shanghai-based Shenyin Wanguo Securities.

In November 2008, a 4 trillion yuan ($590.93 billion) stimulus package was introduced in order to boost China's economy, which also spurred huge credit expansion.

According to the People's Bank of China (PBC), the country's central bank, China's foreign reserves jumped to $2.4 trillion last year, further increasing the country's inflation pressures. In addition, China has increased wheat reserves this year, a move to secure the country's food and is viewed as increasing inflation pressures by surging wheat demand.

China's gross domestic product grew by 11.9 per cent in the first quarter this year, and by 11.1 per cent for the first half of the year, according to the NBS. Meanwhile, the country's purchasing managers' index fell to 51.2 from 52.1 in June, which indicated economic slowdown.

"Slowing growth and rising inflation is a policy puzzle for the government," Bloomberg quoted Tom Orlik, an economist for Stone &McCarthy Research Associates. "I believe China will be more concerned with growth, especially given the uncertain state of affairs in the global economy."

"We will try to make monetary policy more flexible and maintain a balance between the objective of rapid economic growth and controlling inflation," the PBC said Thursday.