BEIJING--Soaring hog prices continued to drive up China's consumer inflation higher in November, but experts remained optimistic that the momentum would slow as the price of pork appears to be heading toward a peak in the coming months.

China's consumer-price index rose 4.5% in November from a year earlier, matching a pace set in January 2012, according to data released Tuesday by the official National Bureau of Statistics. The inflation reading was higher than a 3.8% rise in October and topped the 4.4% median forecast of economists polled by The Wall Street Journal.

The price of pork continued to play a key role in driving up consumer inflation by more than doubling from a year ago and exceeding a previous record for year-over-year pork inflation set just a month earlier in October. An outbreak of African swine fever has wiped out about half of the hog population in China, a country that relies on pork for most of its protein needs, pushing up food prices across the board.

Meanwhile, thanks to recent government efforts to step up supply, the monthly increase in China's pork price eased to 3.8% in November, down 16.3 percentage points from October's month-on-month gain. Beijing has started releasing pork reserves to the market while ramping up imports from its trading partners.

China's core consumer-price index, which strips out volatile food and energy prices, decelerated to a 1.4% rise in November from a year earlier, compared with a 1.5% gain in October.

China's producer-price index, meantime, remained in deflationary territory, but narrowed its year-over-year drop to 1.4% last month, compared with a 1.6% drop in October.

Producer-price deflation made operations of industrial companies more difficult, squeezing their profit margins and curbing their ability to expand investment and production. Chinese manufacturers have already been hit hard by tougher environmental rules imposed by the government and reduced orders from overseas as the trade war between China and the U.S. continues. China's exports fell unexpectedly in November as higher tariffs and sluggish global economy continued to hinder demand.

"Compared with short-term disruptions of pork prices, China needs to pay more attention to its weakening demand and squeezed industrial profits," said Li Wei, an economist with Standard Chartered Bank.

Analysts in recent months have pointed to a divergence between rising pork inflation on the one hand, and softness in nonfood prices and producer-price deflation on the other hand, presenting a dilemma for Beijing policy makers as they seek to head off slowing growth.

China's overall economic growth slowed to 6.0% in the third quarter, right at the bottom line of the government's target for this year. Growth momentum continued to lose steam in the final quarter, prompting some analysts to call for more easing measures to put a floor under the economy.

But the central bank said in a recent monetary policy report that it still needs to keep a close eye on the inflationary risks presented by rising pork prices, which especially hurts lower-income consumers, though it also pledged policies to help offset the slowdown.

Mr. Li, the Standard Chartered economist, said the People's Bank of China will likely refrain from further easing, such as cuts to interest rates or the reserve-requirement ratio, for the remainder of 2019, given the highflying pig prices.

But he also predicts that the price of pork will ease in the second quarter of 2020, thanks to an increased supply of hogs, which could give policy makers more room to stimulate growth.

Zhang Ning, a UBS economist, said pork prices should peak and start declining around the Lunar New Year holiday in late January, which is typically a peak season for meat consumption.

"Next year, we will see further easing and a step-up of growth-supporting measures, though it's unlikely to be big monetary easing seen in 2012 and 2015," said Mr. Zhang.

Grace Zhu and Bingyan Wang

(END) Dow Jones Newswires

December 10, 2019 00:52 ET (05:52 GMT)

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