China has been a major source of price deflation for the past decade. It is now the world’s leading manufacturer of a whole range of products from microwaves to DVDs. And the rest of the world has benefited from the lower prices that it has provided.
But not any more. The attached chart from the ACC’s weekly report shows that import prices from China into the USA increased by a record 3.3% in January. The trend is also worrying. For years, import prices were falling at around 1% a year. Now they are on a steep upward path.
I noted last week that the renminbi is now rising at an annualised 13% rate, whilst Chinese wage inflation is running at 18%. This implies that import prices from China could continue to rise over the next few months.
Helping you navigate the new normal