China: Non-food Inflation Is Rising

I am traveling in Shanghai today so it is not easy for me to post a long entry. Of course a lot of interesting numbers were released today. The only comment I have time to make today is on the CPI numbers.

As expected CPI inflation came in at 8.3% year on year. This implies that prices declined by about 0.7% during the month of March. It also implies that inflation for the first quarter of 2008 is running at 12.9%.

To me the most significant thing was the high level of food inflation – 21% – combined with the rising level of non-food inflation. I calculate that in January non-food inflation was 1.6%, it rose to 1.8% in February and to 2.2% in March.

This rising inflation in the non-food sector, even though it is still under the PBoC target of 3%, is completely inconsistent with the argument that China is only experiencing a temporary food-supply problem. Food prices rising at 21% annually should put brutal downward price pressure on non-food items if the inflation target is credible – that is if PBoC monetary policies are consistent with the target.

The fact that not only is there inflation in the non-food sector, but there is accelerating inflation, indicates to me that the inflation target is not remotely credible. Another one or two months of rising non-food inflation will be enough, I think, to settle the matter once and for all.

Comments

[chinesepetti]

I like to advise every reader here; Mr petti worked in Bear Stern before, the information is on this website seekingalpha.com/autho...
Thank you Mr Petti for your disclosure! You are a great American

[J.D]

I've seen some suggestions inflation has been understated. That would explain the higher than expected GDP number I presume. What do you think?

As for the typographically-challe... alphadisclousre, suggest you look at the Bio. Furthermore, Bear Sterns was a venerable name which is probably why CITIC was ready to invest without due diligence.

[chinesepetti]

J.D for your information; there was only a letter of intent signed between your Venerable Bear Stern and CITIC; but in the end there was not a penny paid to Bear from CITIC. That is why your Fed stepped in.
Let's invest our money in the greatest Venerable Bear Stern as Mr Petti and his pupil J D recommended; why not giving all our money to Mr Petti for a change ? Mr petti; You are such a great American In Shanghai, be careful not to breath too much filthy air there though!

[J.D]

alphadisclousre, that's exactly my point. CITIC jumps in with big bucks, but has no idea what a real bank is supposed to do so has no idea what one is worth. They're only saved by US policy makers tipping them off. Otherwise they would have paid $120 per share for something worth virtually nothing and been none the wiser for it.

Check the history of Chinese government investing abroad, a dismal record indeed.

[chinesepetti]

Of course Chinese are learning; a bit slow maybe but CITIC is a good start as it did not pay a penny in the end. J.D; you might take it slow as you do not read my post 'but in the end there was not a penny paid to Bear from CITIC. That is why your Fed stepped in'. I never said Chinese are perfect as they do have their problems and weakness; however we know what is 'Shame' as we do not try to talking down other nations; we like to focus on solving our problems!

[chinesepetti]

I like to remind readers here; Mr Petti worked for Bear Stern and also he is working in a State Chinese Communist run school at the moment. Details please visit seekingalpha.com/autho...

China has many problems on its own; but it's very ironic the red communists do not mind Mr Petti (who is paid salary by the Chinese communist run school) being so critical of everything in China even the air he breathes every day.

[chinesepetti]

All Mr Petti's pupils and seeking alpha readers here; the story about Mr Petti just does not add up! According to Mr Petti's views (you can read all his articles about China on this site ; strangely he only wrote about China), everything in China is in crisis even the air is filthy so why he is making a living there; getting paid from the red Communist school; why not go back to Wall street to work for Bear Stern ? Bear Stern is not dead yet.

It is time for Mr Petti and his loyal pupils to disclose his relationship with the red Chinese government now!!! And all readers on this site should also make such a demand; otherwise it's an insult to the intelligence of all seekingalpha readers!