Wednesday, May 11, 2011

Bad News From China: Inflation Still Too High, But Economy Slowing, More Tightening Coming

Inflation in China stubbornly continues above 5%, actually hitting 5.3% in April, above expectations. The economy, however, is not doing well, a very bad combination.
Bloomberg reports: "Consumer prices rose 5.3 percent from a year earlier and banks extended 740 billion yuan ($114 billion) of local-currency loans, according to reports from the statistics bureau and central bank. Weaker industrial-output growth, also reported today, may diminish price pressures in coming months.

Today’s data showed that inflation has exceeded Premier Wen Jiabao’s 4 percent target each month this year. The figures may buttress the case made by U.S. Treasury Secretary Timothy F. Geithner in annual bilateral talks in Washington this week that China needs a stronger yuan to contain prices and spur domestic demand".

We track all Chinese ETFs live here.

"Today’s report showed a 25.4 percent increase in fixed- asset investment in the first four months of the year. That figure, combined with a report yesterday showing record export shipments in April, indicates the world’s second-biggest economy has made limited progress in shifting to a growth model more driven by domestic demand.

“The data looks bad,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “The economy is slowing more sharply than expected but inflation is not.”

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