Good morning! I’ll be writing to you from Berlin, Germany these next couple weeks as part of a Fulbright award I won for my business and economics reporting.

Rest assured, you’ll still receive this newsletter every morning. Over the coming days, stay tuned for special editions from expert contributors who are among the best writers in the financial world.

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Pork is soaring and beef is crashing

As everyday Americans deal with inflation by opting for cheaper proteins like sausage, China is wrestling with a meaty puzzle of its own.

Pork prices are up 20% since the start of this year, yet the world’s second-largest economy is still on the brink of deflation. 

Consumer prices in China rose a meager 0.6% in August compared to a year ago.

Most of that gain was driven by food prices — and much of the gain in food prices can be chalked up to pork. 

Like other developing markets, food inflation is particularly important in China because food consumption accounts for a large share of total consumption.

In fact, food, tobacco, and liquor together make up 30% of China’s CPI. 

Pork alone makes up nearly 1.8% of that, as it’s one of the most popular proteins in the country.

Pork in the US makes up a fraction of that figure. 

The surge in Chinese pork prices stems from a variety of factors, according to Bank of America analysts Anna Zhou and Helen Qiao: 

What’s amazing is that despite skyrocketing prices for pork, China still barely registers any total inflation. 

Crashing beef prices are part of that story, as the chart from Zhou and Qiao shows below.

While not as popular as pork, increased imports, less restrictive tariffs and more cattle slaughtering has created a glut of beef supply in China, resulting in lower prices.

Bank of America forecasts China to see an average inflation rate of 0.3% for all of 2024. The firm expects pork prices to climb further as demand peaks this winter. 

“Our analysis suggests that pork supply will likely remain lean in the medium term, implying further upside in pork prices,” the analysts said.

“That said, increased supply of other meat products such as beef will likely become a negative offset.”

In other words: The impact of spiking pork prices on inflation will be negated by crashing beef prices. 

Meanwhile in the US, consumers feel the bite of inflation to the point they are actively adopting cheaper options in their food and retail choices.

A recent survey from the Dallas Fed pointed to weakening agricultural businesses, elevated costs, and a looming economic downturn. 

As I reported in this newsletter last month, one respondent mentioned “modest growth” for dinner sausage: 

“This category tends to grow when the economy weakens, as sausage is a good protein substitute for higher-priced proteins and can ‘stretch’ consumers’ food budgets.”

Comments or feedback? Hit reply to this email or let me know on X @philrosenn.

Elsewhere:

🚨Trump survived a second assassination attempt. The former president is safe after his Secret Service detail opened fire at a man who had an assault rifle at Trump’s golf course in West Palm Beach, Florida. Authorities have the suspect, Ryan Routh, in custody. He has eight arrests on his record. (AP)

✂️Look for three rate cuts in 2024. The Fed is expected to make a 25-basis-point rate cut this week, and at each of the two meetings that follow, according to a new survey of economists. The majority of 46 economists see policymakers opting for a gradual easing of policy, without any jumbo-sized moves. (Bloomberg)

💰️Is Berkshire Hathaway too pricey? That’s what some investors are asking now that Warren Buffett’s company hit the $1 trillion valuation milestone. In August, the conglomerate disclosed that its stock buybacks have slowed to a trickle in recent months after a long stretch of relatively aggressive repurchases: “If Buffett’s not buying his own stock, then why should we?” (WSJ)

🏠️ Housing inventory is still weak. As of August, national active home listings remained 26% lower than the same month in 2019. That said, listings have increased by 36% compared to 12 months ago. Only four states have returned to pre-COVID levels: Florida, Idaho, Tennessee, and Texas. (ResiClub)

Rapid-fire:

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