Friday, August 20, 2010

Price Increases Coming

Reuters is providing advance notice that goods made in China are going to become a good deal more expensive soon; and this is expected to occur without an upward revaluation of China's currency vs. the U. S. dollar. From the article:

"Apparel prices are going to go up. It's as simple as that," said Perry Ellis Chief Executive George Feldenkreis, who said a rise of up to 10 percent will be seen next year. "The American consumer will have to accept it."

China looks to be raising its prices of manufactured good to the developed world. While this article is specific to apparel, it's hard to see that the same type of price rises will not be general from China.

The massive expansion of credit that occurred in past years in both China and the U. S. is beginning to bite, even while the American economy remains weak. The silver lining for this country is that imports represent a relatively small part of the overall consumer cost structure. Nonetheless, those economists who are predicting an actual and somewhat chronic fall in the general price level in America to justify very aggressive low yield targets on long-term federal securities have just been provided with a real-world counterexample.

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