The New Chinese Export, Inflation !!

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Up until now, I have believed that there is not much chance of inflation, all things being equal, from the Quantitative Easing II program being done by the Fed.

However, it has never occurred to me that inflation pressures in the US economy could come from outside of the country.

This quote from Alan Abelson's weekly column provides deep insight regarding global inflationary pressures:

"A nifty report by Bank of America/Merrill Lynch's crack Asian economics team describes how Chinese inflation is going global. In particular, prices of manufactured exports are now rising apace with quotes on commodities. In the latest Canton Fair in October-November 2010, the analysts report, export prices were hiked 3%-5% (in dollar terms) from those exacted from foreign buyers at the same fair held in the spring, while labor-intensive goods -- apparel, shoes, luggage -- were boosted an immodest 10%-20%."

Abelson, Alan, 2010. Street crime. Barron's, Jan. 22.

... and this does not tell the entire story. With rising petroleum prices, it is certain that international shipping cost will also contribute to the inflation mix.

With a huge dependence on China for manufactured consumer goods, America has few options but to pay more at a time when disposable income growth and consumer spending remain sluggish.

High unemployment and accelerating inflation might catch on to hit corporate earnings for the second half of 2011.