China Pork Prices Plunge 40% in One Year... The Looming 'D Fear'

October Consumer Prices Expected to Decline

The price of pork, considered a barometer of consumer prices in China, has plummeted, triggering alarm bells over deflation (a decline in prices amid economic recession).

According to major foreign media on the 6th (local time), the price of live hog futures traded on the Dalian Commodity Exchange in China has fallen by 15% compared to early last month. The wholesale price of pork distributed in China has plunged by more than 40% compared to a year ago.

The cause was a significant drop in demand from the Chinese, who account for more than half of the world's pork production and consumption. To defend pork prices, the Chinese government purchased pork, causing prices to rebound in July, but prices fell again as pig farmers decided not to reduce production.

Due to the recent decline in pork prices, China's overall CPI growth rate is also expected to slow as of last month. In China, pork price trends are considered a representative consumer price indicator. Since pork accounts for a large portion of household expenditures, the weighting of pork items in CPI calculation is significant. Therefore, fluctuations in pork prices can have a considerable impact on the overall CPI amplitude.

Julian Evans-Pritchard, senior China economist at the UK research institute Capital Economics, analyzed, "As pork prices fall, food prices will decline," and "the consumer price inflation rate is expected to turn negative again in October." China's monthly CPI fell to -0.3% in July this year, recovered to 0.1% in August, but slowed again to 0% in September.

Recently, as the Chinese economy faces difficulties due to weak consumer spending and domestic demand, a real estate downturn, and foreign capital outflows, the difficulty in defending pork prices has increased concerns about deflation. One foreign media outlet reported, "If China returns to deflation, consumer sentiment will cool, and the government's efforts to restore confidence in the Chinese economy, which is facing a real estate liquidity crisis, will lose momentum."