October 15, 2007

 

China's food price hikes to peak soon

 

 

Falling pork prices in China during September, the first time since May this year, has led experts to conclude that China's consumer price index (CPI) is likely to peak off in September or October, ending the food price hikes seen in the past few months.

 

China's pork price fell in September, the first fall since May of this year, according to  the September commodity price monitoring report published by the National Development and Reform Commission (NDRC) on Oct. 10. Pork is a staple meat in China.

 

China's pork prices went up to unprecedented levels this summer, bringing along prices for other meats and grains, causing the CPI to rise for four consecutive months to 6.5 percent in August, the highest in a decade.

 

Experts believe that with pork prices having fallen for ninth consecutive weeks now, September CPI is likely to fall slightly.

 

According to NDRC, the drop of pork prices became apparent in late August.

 

NDRC's data shows that September pork price dropped 5.6 percent from August, and price of grain and non-staple food remained stable.

 

The September farm product wholesale price index and vegetable basket product wholesale price index from the Ministry of Agriculture both had the first fall since May this year.

 

CPI growth in November and December last year was 1.9 percent and 2.8 percent. The high base further precludes the possibility of CIP setting a new high in November and December.

 

Despite this announcement, another government think-tank said China's inflation could worsen due to other factors such as surging production costs, excessive fixed-asset investments and rising global commodity prices.

                         

The Chinese Academy of Social Science said in a study that in order to rein in inflation, the government will make price stabilisation its prime objective next year.

 

Although pork and other food prices have been seen as the culprits behind the current rising inflation, they were not the underlying causes, the study said.

 

Increasing labour and upstream product costs were adding inflationary pressure and would sustain inflation even if pork prices stabilised, it said.