Tomorrow’s GDP report will add to fears of inflation in China
Sneak preview on China’s first quarter GDP and March inflation from Reuters today, April 14.
China’s economy grew about 11.9% in the first quarter from a year earlier, unofficial numbers available in Beijing say according to Reuters. That would be above even the whopping 11.7% growth expected by economists surveyed by Bloomberg. China is scheduled to report its official growth and inflation numbers for March and the first quarter on Thursday.
Reuters also reports that March consumer price inflation will come in at 2.4%. That would be down from the 2.7% figure reported for February.
It’s not clear to me how the market will take that inflation report.
Yes, the number will be down from February but when the February number was released economists stressed that the February inflation reading was inflated by the late date of this year’s New Year’s holiday. Expectations were that the inflation number would come down in March. So I don’t know if a 2.4% read would be considered a pleasant surprise or a disappointment.
Either way another bit of news from China this morning says that inflation is headed higher this year.
On April 14 the National Development and Reform Commission announced an immediate increase of 4.05% in the retail price of fuel and 4.47% in the retail price of diesel.
Of course, some economists in the United States would say that kind of inflation doesn’t matter since it comes in the volatile fuel price category that, along with food prices, is excluded from core inflation measures.
But this is still a real increase of about 3 cents a liter in fuel and diesel prices that will come out of the pockets of the average family in China, that will gradually force up the prices of anything that travels by truck, and that will increase worry in the Beijing government that inflation is in danger of getting out of control.
Seems like real inflation to me.
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Jim:
Yesterday you said in the Asian dividend posting that the market turns to “fear”, but Bloomburg had an article saying opposite. (It said the VIX is at lowest in long time.) Any comments?
YX,
Jim was talking about the global equity markets. The VIX measures options on the S&P 500.
Any thoughts on Potash? It was downgraded today on lower prices.
Ed:
Though VIX measures US option, but it gives people some kind of idea about where the US market will go in not far future. (That’s why it’s also called “fear index”.)
Jim’s article yesterday (although it’s about Asian dividend stocks) was saying that we may have chance to buy them at lower price because the market started turning to “fear”.
Anyway, any correction is welcome after today’s HUGE rally! I have more to buy. I found myself busy during both ups and downs.
sliman:
I wish I had sold them when I could make a 12 or 15% gain and buy back now. But I am not too concerned about it. That stock tends to have sharp up and downs. Watch out your timing.
I bought POT once and sold in a month for 20% profit and rebought near the bottom near the end of 2009 but wish I had done it again recently! I can’t believe it fell back again, I was up 20% for the second time in six months. Ah well, I’m still hoping for a nice bounce back up. We’ll see.
dmartin,
I’m buying back into POT on the downgrade.
NYTimes.com reported that consumer prices rose 2.2%, below estimates. And the reaction was ‘no urgent changes needed’, while Asian markets moved up. I will be curious for Jim’s analysis, but that smells fishy. Maybe Geithner really sold them on yuan appreciation rather than decreasing their money supply??? But how much strengthening of the yuan would be enough to hold down domestic consumer prices? Could this be currency ‘revenge’ vs. countries supplying commodities like Australia? Time to go long on the yuan?