MNI: Pork Prices Boost China CPI, Masks Weak Demand - Analyst

China's lacklustre September core CPI highlighted weak domestic demand and the challenge confronting China’s policymakers as they seek to revive growth, an analyst said.

Core CPI eased to a 0.6% y/y pace, a decrease of 0.2pp from August and the slowest pace since March 2021. Headline CPI rose 2.8% y/y in September, up from August’s 2.5%, as pork prices rose 36% y/y.(See MNI BRIEF: China Sep CPI Rises 2.8%; Highest Since April 2020).

“Today’s CPI results reflect a lack of effective demand in the domestic economy” noted Zhang Aoping, founder of Incremental Capital. “It will be difficult for the private sector to support the economic recovery under these conditions."

Pork prices have remained high despite the National Development and Reform Commission releasing more pork from state reserves throughout 2022. Zhang said 200,000 tons of government pork reserves were released in September, the highest ever monthly level release.

Zhang argued policy makers should focus on private sector investment and demand in Q4 following a government-led investment push.