Monday, July 11, 2011

Inflation Rises to 6.8% in China, Food Prices Soar

The National Bureau of Statistics of China released its latest monthly data released showed the consumer price index for June: prices rose 6.4 % from the same period the year before, higher than expectations  between 6.2% and 6.4%.

Food prices rose 14.4%.

In May it had been 5.5%, which had been the fastest rise in CPI since July 2008.

People's Bank of China Gov. Zhou Xiaochuan tried to calm the markets saying that "It's better to use month-on-month inflation (data)...seasonally adjusted and annualized", apparent suggestion that markets shouldn't over react to this large rise in year-on-year inflation for June.
"In China, we use the year-on-year inflation figure without seasonal adjustment: that's the problem," "You always try to think about the base effect."

These comments are bizarre. Comparing subsequent months makes little sense. Comparing the same month in subsequent years does make sense in my books.

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