Devastation in China’s pork industry pushed consumer-price inflation to an eight-year high in 2019, complicating decisions for policy makers looking to boost a cooling economy. Consumer prices were up 2.9% from a year earlier, the National Bureau of Statistics said Thursday—relatively benign by global standards, but a challenge for the world’s second-largest economy.
When inflation last exceeded this level, in 2011, China’s economy was red hot. By contrast, last year it grew at its slowest pace in three decades, say, economists, who estimate gross domestic product was up 6.2% in 2019. Slowdown pressures are likely to worsen this year, while the impact of African swine fever could keep pork prices high and tensions in the Middle East could drive up energy prices. Meanwhile, factory prices have turned down.
Seeking to get ahead of the disease last year, China culled its herds, halving the pig population. The resulting 43% rise in the price of pork, the primary meat of Chinese diets, appeared to have a knock-on effect on prices as far afield as hairdressing as merchants sought to keep up with food costs. An official in the Sichuan province city of Chengdu, known for its spicy hot pot, said recently that local officials face monthly pork-focused performance reviews and would have to publicly reflect on their mistakes should the prices fail to stabilize.
Fan Lei, an economist at Sealand Securities, warned that while last year the leading price driver was pork, “this year the biggest uncertainty is definitely oil.” A 10% increase in oil prices would probably drive up China’s consumer inflation by 0.2 to 0.3 percentage point, he said. Inflation gauges also offer indications that China’s industrial might is dissipating and that many companies may be losing pricing power. Industrial prices were down 0.5% in December from a year earlier.