I’ve been watching inflation in China recently, which you can read about here and here. A recent Reuters report has announced inflation in China is even higher that expected, reaching an 11 year high. At 8.7%, inflation is approaching a full percentage point higher than predicted, and nearing the double digits expected later this year.
China’s Bureau of statistics confirmed what was already suspected - higher food prices caused by the severe winter storm coupled with rising energy prices are the driving factors of current inflationary pressures. The Bureau of Statistics went on to explain that with food and energy taken out, core inflation was a more acceptable 1% in February.
However, given the unique circumstances in China (i.e. a massive population, extreme energy shortages and reduced crop yield), trying to paint the economic picture in China without food and energy is unrealistic. It’s also not likely to be short lived since resources in China are stretched so thin.
The question becomes, with the economies of the US and China so inextricably linked, how will inflation in China affect the US?
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