<\/a><\/p>\n A good comment dug out of a Bloomberg report:<\/p>\n April\u2018s consumer-price data \u201cis a disappointment because it shows that tightening measures introduced so far have not managed to prevent economic overheating and bring price pressures under control,\u201d\u009d said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. The data indicates \u201ccontinued spreading of price pressures to the broader economy, which will require further tightening.\u201d\u009d<\/p><\/blockquote>\n Even as the Producer Price index has slowed its recent ascent, the stubbornly high level is providing troubling signs. As China competes for low price manufacturing on a global scale, these higher prices will inevitably be passed on to buyers. That is not a welcome sign for the major importers, like the U.S. and Europe.<\/p>\n Either one of two things will happen: Export pricing and CPI will continue to climb, or margins will be compressed and China’s companies will show lower profits. Which one occurs will best be shown in the equity markets move over the next few months. \u00a0 (My money is on China’s ability to pass on price increases)<\/p>\n As the pricing of goods increase, retail sales suffers – a simple equation. Only within an economy that also has a commensurate rise in wages will that thesis fail. So far, China’s wages are not accelerating quickly enough to offset this increase.<\/p>\n Already the tightening measures are taking hold as the money supply measure has recently slowed to the lowest since November 2008.<\/p>\n![\"\"](\"https:\/\/thedisciplinedinvestor.com\/blog\/wp-content\/uploads\/2011\/06\/chinacpi_06132011-1.jpg\" "\\"chinacpi_06132011\\"")
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