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European inflation accelerated to the fastest pace in two and a half years

European inflation accelerated to the fastest pace in two and a half years and confidence in the economic outlook declined as surging energy prices threatened to undermine growth.

Inflation in the 17-nation euro region quickened to 2.8 percent in April from 2.7 percent, the European Union’s statistics office in Luxembourg said today in an initial estimate. Economists had expected inflation to remain unchanged, according to the median of 34 forecasts in a Bloomberg News survey. An index of executive and consumer sentiment slipped to 106.2 from 107.3 in March, the sharpest drop since May 2010, and unemployment held at 9.9 percent, separate reports showed.

Crude-oil prices have soared 38 percent in the past six months, pushing inflation above the European Central Bank’s 2 percent limit and prompting policy makers to raise interest rates this month for the first time in almost three years. At the same time, higher raw-material costs are weighing on consumption and company profits, just as governments across the region cut spending to narrow budget deficits.

“The inflation numbers support the view that the ECB will deliver another interest rate hike before long,” said Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam. “Growth was exceptionally strong in the first quarter, but will slow from here. The labor market is still very sluggish and paired with inflation that’s not good for purchasing power.”

German Output

The euro was little changed after the data were released, trading at $1.4867 at 11:31 a.m. in Brussels, up 0.2%.

European services and manufacturing growth unexpectedly accelerated in April, driven by higher output in Germany and France, the region’s largest economies. Still, European investor confidence declined as faster inflation and higher interest rates may hurt the recovery. Euro-region growth will slow to 1.6 percent this year from 1.8 percent in 2010, the European Commission forecast last month.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

China Inflation And Wage Protests Spread, Turn Violent

 

 Yesterday we reported news that has so far received almost no media exposure, namely that thousands of striking truck drivers had poured into Shanghai‘s Waigaoqiao zone, one of the city’s busiest container ports, protesting over “rising fuel prices and low wages.” Today, via Reuters, we learn that this situation has escalated materially, and progressed into violence: “A two-day strike over rising fuel prices turned violent in Shanghai on Thursday as thousands of truck drivers clashed with police, drivers said, in the latest example of simmering discontent over inflation. About 2,000 truck drivers battled baton-wielding police at an intersection near Waigaoqiao port, Shanghai’s biggest, two drivers who were at the protest told Reuters. The drivers, who blocked roads with their trucks, had stopped work on Wednesday demanding the government do something about rising fuel costs, workers said.” And while we have violent uprisings over austerity in Europe, now we have violent strikes over inflation in China? The question thus now is just how much longer will China continue to take massively ineffective steps such as RRR and rate hikes, both of which have been a tremendous failure in reining in inflation, instead of picking the nuclear option of revaluing the currency. And while many believe China may announce something along those lines over the weekend, Win Thin, global head of emerging market strategy at Brown Brothers Harriman, is not so sure and put the odds of a yuan revaluation at 25%. “With regards to currency policy, we are putting forth the following three possibilities along with odds: 1) keep current pace of appreciation (10%), 2) do one off revaluation (25%), and 3) speed up pace of appreciation (65%).” Either way, with more people joining the populist movement against inflation, China is now between a rock and a hard place: will it continue happily importing Bernanke’s inflation exports or finally retaliate. Unfortunately for its economy, the appropriately called “nuclear option” of revaluation, will leave it export economy flailing. So the real question: is China ready to migrate from an export-led to a consumer-led model. Alas, the answer is a resounding no.

More on China’s now violent protest:

 
 “I want the government to stand up to solve our problems because we cannot take this anymore. We are unable to bear the cost of operating now,” said a driver surnamed Chen, 33, a native of Henan provincewho has been driving for eight years.The strike comes against a backdrop of rising consumer prices and fuel price increases. China’s inflation rate hit 5.4 percent in March, prompting officials to renew vows to use all available means to contain price rises.Police arrested at least six people and beat up some protesters with batons, said Chen and another driver also surnamed Chen, 35. They declined to give their full names or the name of their company for fear of reprisals.

Both drivers, who work for a small transport company, showed photographs to two Reuters reporters of police carrying a man with a bloodied head, with his wife and daughter at his side.

Repeated calls to the Shanghai public security bureau and the municipal government went unanswered.

Worse, the strikes are now metastasizing to other cities:

 
 Truck drivers also staged strikes in other ports in Shanghai including Baoshan and Yangshan, the drivers said.The strikes and protests, if they continue, could become a worry for the ruling Chinese Communist Party, which fears public discontent that could erode its authority and alarm investors.Workers say their wages have not kept up with rising prices.

One wonders why the Chinese, living under an authoritarian regime are willing to engage in violent protests with far more dangerous personal consequences, while the American peasant continues to gladly accept $5 and soon $6 oil:

 
 The 33-year-old Chen said his disposable income had fallen to 4,000 yuan (370.28 pounds) a month, from 6,000 to 7,000 yuan a month last year.The 35-year-old Chen said he was still on strike, together with what he estimated were thousands of others.At a parking lot three blocks away from the protest site, about 30 anti-riot policemen arrested two truck drivers and dispersed a crowd of 50 to 70.

Earlier, other truck drivers had driven past, shouting to their fellow drivers to “join the strike, stop driving.”

What is sure, is that the immediate impact of the strike is already being felt:

 
 ROE Logistics, a Montreal-based customs broker and freight forwarder, issued a statement on Wednesday about a strike at a Shanghai port, saying it could result in delays.”Delays in receipt of export containers may result in possibleknock-on effects to sea freight with possible delays or rollovers from carriers,” the firm said.An employee in Shanghai from another shipping company, New York-based Ocean World Lines, confirmed there had been a strike but declined to give other information.

“This is a sensitive topic. I really don’t have any other information,” Max Wang told Reuters.

And while it is logical that China’s propaganda machine would not talk about this development, why other “democratic” countries have said nothing about this is just a little strange:China’s state media has been silent on the protest, underscoring the sensitivity of unrest for the ruling Communist Party, which normally stamps out protests fearing a threat to stability.China said in early April it would increase retail gasoline and diesel prices by 5-5.5 percent to record highs.

The good thing is that China now has hit its breaking point. Any inflation beyond current levels will only make matters worse. So the ball is in the politburo’s court. Alas, as central planning does all too well, expect the decision taken to be the worst possible one for both China’s and the global economy.

h/t Christopher

source:http://www.zerohedge.com/article/china-inflation-and-wage-protests-spread-turn-violent

Comment:

 China is Key if things go pair shaped in china then the rest of the world will be in deep trouble up to about a year ago I was buying quite a lot of electronics, and software from China, I noticed a few months ago the prices were creeping up and up until eventually it was not worth buying in China any longer as the cost ,time, and duties all negated the difference from buying in any other European country

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