the visible hand

it is the theory which decides what can be observed – einstein

China’s Inflation Hits American Price Tags

Posted by ecoshift on February 2, 2008

China’s Inflation Hits American Price Tags – New York Times
February 1, 2008

SHANGHAI — China’s latest export is inflation. After falling for years, prices of Chinese goods sold in the United States have risen for the last eight months.

Soaring energy and raw material costs, a falling dollar and new business rules here are forcing Chinese factories to increase the prices of their exports, according to analysts and Western companies doing business here.

The rise was a modest 2.4 percent over the last year. But even that small amount, combined with higher energy and food costs that also reflect China’s growing demands on global resources, contributed to a rise in inflation in the United States. Inflation in the United States was 4.1 percent in 2007, up from 2.5 percent in 2006.

Because of new cost pressures here, American consumers could see prices increase by as much as 10 percent this year on specific products — including toys, clothing, footwear and other consumer goods — just as the United States faces a possible recession.

In the longer term, higher costs in China could spell the end of an era of ultra-cheap goods, as well as the beginning of China’s rise from the lowest rungs of global manufacturing.

Economists have been warning for months that this country’s decade-long role of keeping a lid on global inflation was on the wane.


3 Responses to “China’s Inflation Hits American Price Tags”

  1. Steven said

    For those paying attention, I imagine this rush to globalization looks a little more ominous now that we can see the day when we’ll be on the other side of the equation. All of the factors you mention here contributed to our Wholesale(!) Price Index for 2007 going up by 6.5%. Really, that’s staggering.

    Speaking of staggering, next year’s federal budget –

  2. Steven said

    Sorry about bleeding that link off the page :/ — feel free to clean it up in an tag.

  3. ecoshift said

    It is ironic that globalization seems to be playing out in unforecast if not unpredictable ways. While some corporations seem to be well placed in the global economy, there do seem to be some unexpected changes in the balance of power internationally.

    No problem with the bleeding link, worked fine. Interesting as well. The more cynical among us might think the deficit spending was an intentional curb on government effectiveness…

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