Aug 12 2008
china wholesale prices surge 10% in july
CNN Money ran an article today entitled, “China wholesale prices surge”. Of course, the news isn’t really all that new to anyone following the effects of inflation in China over the past year or so. However, the rate of inflation is rather disturbing: its the highest rate in 12 years.
China’s wholesale inflation in July accelerated to its highest rate in 12 years, adding to the government’s headaches as it tries to rein in surging consumer prices, according to data reported Monday.
The producer price index was up 10% in July over the same month last year, the highest rate since 1996, the Xinhua News Agency said, citing the government’s statistics bureau. The index measures the price of goods as they leave the factory.
Analysts have warned that rising costs for energy and raw materials would push up Chinese wholesale prices, squeezing thin profit margins for companies and adding to pressure for retailers to raise consumer prices. The government is due to announce July consumer inflation on Tuesday.
The July rise in the producer price index, or PPI, exceeded analysts’ expectations and was a sharp jump over June’s 8.8% rate.
The cause of such inflation?
Producer prices for raw materials, fuel and power rose 15.4% in July over the same month last year, up from June’s 13.5% rate, Xinhua said.
So again, nothing terribly new. Steel prices, oil/gasoline prices, etc. have been going out the roof over the past year.
What does this mean? Watch out for your suppliers wanting to raise rates on you. In fact, if they aren’t doing it already, don’t be surprised to see it happening in the near future. Also watch out for future costs of sourcing and production to increase. What I’m saying isn’t exactly rocket science. But the warning is still worth making given this news.
Don’t agree with me? CNN Money also ran a companion article entitled, “In China, outsourcing is no longer cheap” that I will try to get around to talking about tomorrow.
