Persistent weakness in Chinese consumption will prevent businesses from charging higher prices even as production costs keep rising, says Leland Miller of China Beige Book International, a U.S.-based independent data and analytics firm. “The most problematic dynamic of China’s recovery which overall has been very strong in the past year, year and a .
Until there s a reset in household spending, businesses will not be able to raise prices much, he explained. This is essentially gonna be a problem on the production side and, you know, specifically the factory side.
That hurts the amount of money manufacturers can make.
Official data on Wednesday showed China s producer prices surging 9% in May compared to a year earlier, the fastest since September 2008.
Miller said the inflation situation in China right now is very focused and centered on commodities, as well as factories which were being squeezed on cost. Yes, there s an inflation issue. Yes, it s gonna be tricky for some of the parties in China. But specifically … it s on the production side. It has not moved over to consumer side, he said. It s a fairly specific problem in China right now, even if it s rather intense for the time being.