More worrisome is another theme I promoted in the fall, the export of inflation out of China. For a long time, the flood of products from China has been keeping a lid on prices. For the first time I have seen, we are now seeing costs rise (0.1%) out of China. 0.1% sounds like nothing but in years past it was a negative number and a large negative number at times. So as costs rise in China, its slowly going to begin to be passed on to the countries they export to. So yet another factor working against the US consumer.
This is only becoming worse now... (don't blame it all on petroleum either)
- Prices of goods imported into the U.S. rose more than forecast in January, pushing the increase for the last 12 months to a record, led by rising costs for energy products and food.
- The 1.7 percent increase in the import price index followed a revised 0.2 percent decrease the prior month, the Labor Department reported today in Washington. Prices excluding petroleum rose 0.6 percent.
- Higher import costs, sustained over several months, may increase the chances U.S. companies will try to follow their foreign competitors in increasing prices. Still, Federal Reserve policy makers remain focused on risks to growth and are prepared to lower interest rates further, Chairman Ben S. Bernanke told U.S. lawmakers yesterday.
- Import prices were forecast to rise 0.5 percent, according to the median estimate of 52 economists in a Bloomberg News survey, after being previously reported as unchanged in December. Forecasts ranged from a gain of 2 percent to a drop of 1 percent.
- Compared with a year earlier, prices of imported goods increased 13.7 percent, the biggest jump since record-keeping began in 1982. That followed a 10.4 percent year-over-year increase in the prior month. Excluding petroleum, prices rose 3.6 percent in the 12 months to January.
- The government is scheduled to release its measure of consumer prices on Feb. 20 and wholesale prices on Feb. 26. Both reports are forecast to show that excluding fuel costs, price pressures were contained. (yes very convientently)
- Prices of goods from China rose 0.8 percent, and were up 3.3 percent for the 12-months ended in January, the biggest year-over-year gain since the measure began in 2004.
- Prices of farm exports increased 5 percent, while those of non-farm exports rose 0.8 percent.
So think about how we import almost everything from China ... and how the worm has finally turned, after a decade plus of being a great deflationary salve on our economy, China has finally begun to export inflation.
Remember, even the Maestro himself is getting on board [Greenspan Jumping on my Stagflation Thesis]
I highlighted the issue of the coming Chinese inflation Sept 11, 2007, before it was fashionable [Chinese Inflation Highest in 11 Years - Why do You Care?] Now, within 6 months it's showing it's ugly head in actual reports.
Also, remember we import so much from this country of "CHEAP" labor. What happens when they demand higher wages so they can do minor things like... EAT. Chinese companies are already skimping in quality control since they are trying to outdo each other on pricing - and you see the results in dog food, kids toys, and I am sure I already forgot a few others in the near weekly recall news. So increased safety regulations, increased wages for their workers - and suddenly Chinese goods become more expensive.... and who pays? The US consumer - in the form of potential inflation.
