Chinese headline inflation accelerates in March, pork prices to rise further in months ahead

Chinese headline inflation accelerated in the month of March, as anticipated. On a year-on-year basis, consumer price index rose to 2.3 percent from 1.5 percent in the prior month. This was driven by the surge in pork prices which are likely to rise further in the months ahead due to the African swine fever. Non-food prices remained stable at 1.8 percent but food prices climbed above 4 percent as pork prices reversed the contraction of the last two years and sharp rise above 5 percent, noted Commerzbank in a research report.

The disease was first reported in August 2018 and reports are that up to 1 million pigs have been culled, leading to increased demand internationally, including from European suppliers. Pork is a significant input in the consumer price index basket.

In the prior episode of a pig shortage, pork prices rose more than 30 percent year-on-year in early 2016. Producer prices were also stronger at 0.4 percent year-on-year and avoided a drop back into deflationary territory. The authorities are keen to avoid a repeat of deflationary period between 2012 and 2016.

“The latest uptick in March PMI indicates initial signs of success from the stimulus measures but it is still early days. The rest of the March data will be released in the coming week including the trade data tomorrow. On FX, USD-CNY is once again a picture of calm. It was unmoved by the CPI data and held steady around 6.7150”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Chinese yuan was highly bearish at -117.903 while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 52.0601 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex