The strong upswing in Chinese consumer price inflation in November has a very straightforward explanation. The swine flu epidemic and the devastation this has inflicted on Chinese pig herds – reducing total numbers by over 40%. Indeed, meat prices are up 74% yoy, driven by pork which is now up 110% compared to the same period last year.
Consumer prices remained steady in June with prices actually falling m/m, which kept the y/y rate at 2.7%. The backdrop would have been more encouraging had swine flu not taken its toll on meat prices while fresh fruit and vegetables have also soared over the past few months.