Sunday, March 13, 2011

February Trade and Inflation Figures: Good or Bad News for China?

Patrick Chovanec submits:

Two important pieces of economic data came out in China over the past two days.

I?ll deal with the more straightforward story first. On Friday, China?s Consumer Price Index (CPI), a standard measure of inflation, came in at a year-on-year increase of 4.9% for February, the same rate as in January. The number suggests that while inflation isn?t getting dramatically worse, it hasn?t gotten any better either, despite two months of tighter anti-inflationary policies. Even the most optimistic analysts suspect a substantial amount of further tightening will be needed to bring the rate down to the government?s 2011 target of 4%.

Now onto a somewhat more complicated subject. China released its monthly trade figures on Thursday, showing a $7.3 billion trade deficit in February. Since China usually runs trade surpluses ? and large ones at that ? the news attracted a lot of attention and prompted plenty of speculation about

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