Food price inflation now visible in China

By Sober Look

China’s Ministry of Commerce blamed the increase in vegetable prices on “strong winds and rainfall in the country’s eastern regions” that “disrupted production and logistics.” Nevertheless vegetable prices are up 15.4% over the past four weeks.

China Daily: – The wholesale prices of 18 types of vegetables in 36 cities rose for the fourth consecutive week, up 2.9 percent week-on-week and 15.4 percent cumulatively over the past four weeks, according to the MOC.

Signs of food inflation seen across emerging markets are now visible in China. And anecdotal evidence (see these interviews by Radio Free Asia) suggests that official inflation gauges in China may be understating true consumer price increases. Wholesale food prices have definitely risen lately.

A Bloomberg article this week even suggested that China may postpone some policy easing due to renewed inflationary concerns .

Bloomberg: – China’s slower-than-forecast cuts in banks’ reserve requirements show authorities are reluctant to shake their concern inflation will quicken, three months after Premier Wen Jiabao shifted priorities to boosting growth.

China has left the reserve ratio for the biggest banks at 20 percent since mid-May while lowering interest rates in June and July, bucking forecasts from HSBC Holdings Plc and Societe Generale SA that the government would build on three ratio reductions since Nov. 30.

The ISI Group had this to say on the topic of rising food prices, particularly in Emerging markets (discussed here a month ago) :

“This is an unexpected, supply-related problem for both consumers and policymakers around the world.”