Friday, June 11, 2010

Chinese Inflation & Industrial Production

Consumer price inflation rose to 3.1 per cent in May from 2.8 per cent the month before, while factory gate inflation was also higher at 7.1 per cent, up from 6.8 per cent. However, industrial production dropped to a year-on-year increase of 16.5 per cent in May, against a 17.8 per cent increase the month before.

Falling growth and rising prices places the government in a policy quandary,” said Tom Orlik, economist at Stone & McCarthy in Beijing. “Falling growth argues for policy continuity. Rising inflation suggests accelerating the tightening schedule.”

China may be headed for a prolonged period of stagflation in the future.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Twitter: AnalyzeCapital

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