By now you have probably heard about weakness in equities worldwide related to new economic data in China. China's consumer price index was up 3.3% in March vs. a year earlier, much higher than the 2.7% pace expected by the consensus of forecasters. The increase is the highest since February 2005 and almost double the average of the past five years.
This, combined with stronger-than-expected economic growth during the first quarter, has rationally boosted concerns about possible actions in China to reduce its
torrid growth. As reported, China's GDP expanded at an 11.1% pace during the first quarter, a bit higher than the 10.4% consensus forecast.
In response to these numbers, China is likely to pursue additional tightening measures, including continued revaluation of its currency, but no severe actions are likely until next year, when China has had a chance to showcase itself to the world at the 2008 Olympics in Beijing.
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Tony Crescenzi Blog Jobless Claims Jump 4/19/2007 8:49 AM EDT Don't be lulled by February episode.
Tony Crescenzi Blog U.K. Bonds Lift U.S. Bonds 4/18/2007 12:44 PM EDT The realization that future rate hikes are fully priced in is fueling the U.K. rally.
Tony Crescenzi Blog Confidence Index Up 4/18/2007 11:49 AM EDT But the rise is its lowest level vs. the average of the past year.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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