Photo Credit: YourBusinessInChina.com
Though the Chinese government is worried about inflation, Chinese consumers are happy to spend the excess money they’ve been finding. With a government reported inflation rate of 6.3% and consumer spending growing by 23.3%, there is still plenty of health in the Chinese economy, regardless of what the stock markets and analysts may indicate.
Beat analysts proven wrong by Chinese spending
Analysts were expecting a growth of around 22.5%, which was soundly beaten by unexpected consumer purchases from the Olympic games. Newly middle class Chinese citizens were making big purchases in TVs and other consumer electronics to keep up with their favorite athletes. Foreign spending from Olympic travelers certainly did not hurt spending levels, which were boosted by the large capital inflows coming from all over the world.
Growth slowed in autos
Growth in automobile sales was slower than June, but still posted a whopping 28% gain over a year earlier. Chinese consumers are spending heavily year over year, even though the month to month gains may be sporadic.
Cost-push economics have played themselves out very clearly in the Chinese markets. Consumers were battling higher prices in the early part of 2008, but have found a healthy balance between rising prices and rising incomes and the ability to spend money. As inflation is cooling, Chinese citizens are getting more out of each trip to the store. The Olympic games and a generally rewarding trade surplus is leaving the Chinese with more money in their pockets that they’re willing to spend. As long as expenditures continue to outpace inflation, the economy is still strong. This month, spending practically tripled the current inflation rate – showing that the economy is still strong and growing without the numbers game help that inflation usually provides.
With inflation at 6.3%, it is safe to assume that some of the extra spending is fueled by inflation and higher prices, though consumer spending is growing far faster than inflation, which indicates that wages and personal income are keeping up with inflationary powers. There is little to worry about in regards to the Chinese economy; it’s growing strong and the citizenry of China are happy to spend.