During June, inflation in China was up 7.1%. That is somewhat better than recent figures, but is still very troubling. According to Reuters, "for the first six months as a whole, consumer prices were 7.9 percent higher than a year earlier -- well above the government's official full-year target of 4.8 percent."
Over time, and that time may be brief, high costs in China means rising prices for exports to places like the US. Much of the inflation on the mainland comes from rocketing oil and commodities prices. Those will eventually have to be passed through the manufacturing process and that means that prices for American-bought goods sourced in China are going up. That in turn, puts pressure on US inflation rates.
The China numbers should remind US companies and policy markers that rising costs are a global issue and not a local one. The rising price of oil and food will take their toll across the world and cannot be contained in any one geographic sector. As the American economy slows, increasing prices out of China also increase the risk of stagflation.
All in all, China is just the first link in a long chain and that link is weakening.
Douglas A. McIntyre is an editor at 247wallst.com.
Why isn't Bank of America updating its shareholders on CEO situation?
Before the bell: Futures sharply lower on Dubai's debt problems
Will Rich Ross really have a positive impact on Disney's movie operations?
Reader Comments (Page 1 of 1)
7-08-2008 @ 8:00AM
rmatzen525 said...
Get rid of the oil speculators