Friday, April 15, 2011

Inflation undermines consumer confidence - Arthur Kroeber

arthurkArthur Kroeber by Fantake via Flickr
China's government is placing its bets on increasing domestic spending by consumers, tells Arther Kroeber in The Guardian. But the inflation seems to be undermining the confidence among those consumers.
The 11.7% rise in food costs reflected growing demand, a shrinking pool of young workers – pushing up agricultural wages – and supply chain problems, said Arthur Kroeber of economic consultancy GaveKal-Dragonomics.
"In public, the officials like to talk about commodity prices, because it is always easier to blame problems on something outside," he said. "But if you look at what they are actually doing, I think it is pretty clearly understood that the sources of inflation are domestic."
That required tighter monetary policy and market reforms to improve efficiency, he said...

Kroeber said: "There's a consumption component that's very strong, but the retail sales number is going down. If you look at auto sales, they've slowed down a lot. Consumer confidence surveys show it has progressively weakened over the last six months.... The headline number is implausibly strong."
He said the data did not allow analysts to judge what was happening to consumer spending.
More in The Guardian

Arthur Kroeber is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.
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