COMMENTARY COVERSHEET
Economics commentary number: HL Number 2
Title of extract: Bird flu seen as curb on inflation
Source of extract: South China Morning Post
Date of extract: 12th April, 2013
Word count: 823
Date the commentary was written: 17th April, 2013
Sections of the syllabus to which the commentary relates: chapter 6, 7, 10, 12
Candidate name: YenHusan (Michelle) Jen
Candidate number:
Commentary Number 2 Extract
APRIL 12, 2013
Bird flu seen as curb on inflation
CPI growth expected to ease as mainlanders stop buying chicken and pork products
The H7N9 bird flu outbreak has already had an impact on stocks of firms in expected sectors, such as restaurants, and unexpected ones, including carmakers.
Now the new strain of avian flu, which has killed 10 people, is being seen as an effective antidote to food price inflation.
Market exponents of black humour are likening it to a new means for the authorities to rein in growth in the consumer price index, as millions of mainlanders shun chicken and pork products.
Admitting that it is difficult to gauge the bird flu's impact on key indicators, economists said it would certainly drag down CPI growth. Consumer prices rose a less-than-expected
2.1 per cent last month.
Food prices, which normally represent about 30 per cent of the total weighting of the CPI's components, rose 2.7 per cent last month, lower than the 3.6 per cent forecast by Shenyin
Wanguo Securities.
Li Huiyong, the chief economist at Shenyin Wanguo, said CPI would grow at a pace lower than 3 per cent for the full year.
The H7N9 outbreak was uncovered at the end of last month. There have been 38 cases, 10 fatal. In Shanghai, the city government halted live poultry trading in all wet markets and slaughtered thousands of birds to prevent the virus from spreading.
Yum Brands, which controls KFC, said sales of the restaurant chain in the world's most populous market would be severely affected by the flu. "Within the past week, publicity associated with avian flu in China has had a significant, negative impact on KFC sales," it said in a regulatory filing.
Business at Shanghai Xiao Shaoxing, a restaurant chain specialising in chicken, reportedly plunged 60 per cent in the past week.
E-commerce sites including Alibaba Group's Taobao Marketplace have banned online trading of live poultry.
Most Shanghai residents also temporarily banned pork from their dining tables on hearing the news that a butcher had died from the flu on March 10.
The death sparked a panic, since more than 10,000 dead pigs from the neighbouring
Zhejiang province were found to have floated to Shanghai's Huangpu River last month.
"The change in people's eating habits could prove more effective than the central bank in containing consumer price increases," said Dong Da, a stock and futures investor. "The only question is how long the virus' impact on CPI will last."
The price of pork has been one of the leading indicators for national CPI figures since
2007, when a spike in it heralded a stubborn bout of inflation.
Inquiries of companies in other sectors of the economy, such as tourism and airlines, found they have yet to experience any fallout from the bird flu outbreak.
Multinational firms said no business trips to Shanghai and China by their clients and employees had been cancelled as there was no evidence that there had been any human-tohuman transmission.
Unlike the Sars epidemic in 2003, when mainland officials were forced to revise the economic outlook downwards, the latest outbreak appears to have had minimal impact thus far on the economy as a whole. Nonetheless, it has emerged as a new theme for players in the volatile mainland stock market.
Investors speculated heavily on stocks that could plausibly be affected by a major outbreak, such as drug makers and airlines.
Even carmakers' stocks jumped on Tuesday, driven by speculation that more people would buy their own cars to avoid being exposed to the virus on public transport.
