Saturday, December 11, 2010
Chinese inflation spikes on food costs
High food costs are likely the cause of high inflation in China. In one year, the consumer prices have increased 5.1% and food prices have increased 11.7%. To make matters worse, China's trade surplus has decreased 16% over a month. In order to prevent run-away inflation the People's Bank of China may move to increase interest rates.
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3 comments:
This is very interesting because China's export has been growing at roughly the same level. Nevertheless, it appears that people are beginning to consume more thus narrowing the surplus gap. If this trend continues, China might be in deep trouble.
Food companies especially in the US are suffering from increasing commodity prices like wheat and corn etc because of the harsh weather conditions in Russia and the flooding in Pakistan, prices are increasing partly due to the companies passing on those prices to the consumers
In this article, the inflation that is referred in China actually includes food and energy prices while U.S inflation does not. That's why we inflation in the U.S is so low. The CPI given as a comparison is not relevant at all. At the same time, because food was included, as it goes up, so will the inflation. I think for a country like China with approximately 1.3 billion people, food price rising is no surprise, especially when its focus on agricultural sectors loosens over time.
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