Chinese Inflation Eases Unexpectedly as Economy Slows

 

by John Galt
June 9, 2012 07:15 ET

 

The Chinese Communist Economists learned from the best and in the tradition of the American Bureau of Labor Statistics, the mythical Consumer Price Index inflation data was released this morning (From Xinhua):

 

China’s inflation eases further, more monetary easing expected

 

BEIJING, June 9 (Xinhua) — China’s inflation unexpectedly eased to a 23-month low due to falling food prices and base effect, providing ample room for the government to boost slower-than-expected growth in the world’s second-largest economy.

 

The consumer price index (CPI), a main gauge of inflation, slowed to 3.0 percent in May from a year ago, the National Bureau of Statistics (NBS) said Saturday. It weakened from 3.4 percent in April and 3.6 percent in March.

 

Compared with the previous month, the CPI edged down 0.3 percent, the NBS said.

 

The CPI climbed 3.5 percent in the first five months compared with the same period last year.

 

Last month, food prices, which account for nearly one-third of the weighting in the calculation of China’s CPI, saw a 6.4-percent year-on-year increase, but were also down from 7 percent in April.

 

On a monthly basis, food prices fell 0.9 percent from April, the NBS said.

 

Farm produce prices fell for the fifth consecutive week in the week ending on June 3. Although garlic and egg prices surged due to dwindling output and bad weather, vegetable and pork prices fell remarkably, the Ministry of Commerce said Wednesday.

 

Food prices play a dominant role in the CPI calculation, and it is notable that pork prices dropped by one-third in the past year, said Teng Tai, the chief economist with Minsheng Securities.

 

That should provide an excuse to ease further but once again, the question is for what purpose? Further easing into a slowing economy does nothing if the Chinese consumer can not pick up the slack left by the deteriorating if not recessionary conditions in Europe and the United States. One of the keys to reducing the inflation rate was demonstrated in this sentence from the same article above:

 

The National Development and Reform Commission (NDRC), the country’s economic planning agency, on Friday announced the second price cuts for gasoline and diesel in one month in response to lower crude prices on the global market.

 

In other words, communist policies for controlling inflation do work with price fixing and ordering shops to lower their prices regardless of cost. Hopefully Herr Obama doesn’t tell his BLS to take up the same idea or the numbers from our government become even more useless. Too bad the bubblemedia will not recognize this news for the reality it actually purports:

 

The world’s economies are slowing down and this leg of deleveraging will hart far worse than the shocking first phase in 2007-2009.

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