Econ commentary. The article talks about inflation in China. The CPI rose 4.9% in February.

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Econ Commentary 2

News article

Title: Business Daily Update: Heightened inflation a concern in China

Source: Business Daily Update (China)

Date: March 28, 2011

Commentary:

Date Written: 25/03/2012

Word Count:

Name: Fernanda Lai

The article talks about inflation in China. The CPI rose 4.9% in February. Inflation is a sustained increase in the price level of an economy over time.  The main cause was major companies in China, especially those that produce commodities, raising prices of their goods. “Four leading daily consumer product manufacturers, will raise prices by 5 to 15% starting next month”, and these companies command four-fifth of China’s consumer product market share. The raise in prices will cause higher inflation, and will have quite a big impact.

The companies said the increase in prices was due to rising raw material and energy costs. Higher oil prices have contributed to inflation. “On march 23, crude oil prices reached their highest level since Sept 26, 2008, with prices for May settling at $105.75, a barrel on the New York Mercantile Exchange. It is estimated that increase in energy prices will lead to an increase in 7.2 % in February in the producer price Index.

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A second cause is rising global commodity prices, such as petroleum, copper, cotton or any standardized product that usually refers to a good produced in the primary sector. The sustained price growth in food sector. The increase in global commodity prices affects the aggregate supply curve in the same way as rising energy prices, as both are inputs in production.

Rising energy costs and commodity prices leads to a decrease in aggregate supply. An increase in the price of an input increases the cost of production. This means a decrease in profit margins for producers. As a ...

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