Many believe that inflation in China is running much higher than the reported 5% (some think it’s easily double-digits).
When looking for news and numbers on China, I like to look to Hong Kong, which has a better reputation for being, shall we say, open and honest about things.
HK’s South China Morning Post reports that inflation is running at least at 5%:
Food price rises jumped to 7 per cent in May from 6.3 per cent in April, while housing rentals climbed 6.1 per cent in May from April’s 5.1 per cent. Hong Kong’s inflation is expected to hit another 35-month high in June and it will stay high for the next three months.
Which leads me to believe that price increases are running at least a bit hotter in China. Food, for one, is a much bigger part of the average budget in mainland China than it is in affluent Hong Kong.
China’s central bank raised rates earlier today – though they may still be running real negative rates. I’m not sure anybody knows for sure.
With food prices appearing to form a top here, at least for the time being, this could provide some inflation relief in the quarters ahead, and signal an end to rate increases for a bit. Until, maybe, “something bad happens” to give an excuse for QE3, of course!
All of a sudden, there’s a lot of food available, and QE2 has ended. Agriculture ETF DBA rolls over for the time being.