Price Increases in Asia Fan Inflation Fears in U.S.; As Production Costs Rise, Imports Could Get Pricier; Fed Not Eager to Boost Rates
Sharp increases in global commodity prices are beginning to push consumer prices higher in Asia, boosting the odds that inflation will be exported to the U.S. and elsewhere in the months ahead.</br></br>Consumer prices had been holding fairly steady, or even declining, in much of Asia in recent years, as the region's economies worked off excess capacity amid the global downturn. But as Asia heats up again, price pressures are building, in large part because of China's ravenous appetite for raw materials. Oil prices have shot up and are hovering around $35 a barrel, while the prices of other raw materials, including scrap steel and copper, are double or more what they were just 18 months ago.</br></br>As a result, consumer price inflation, while still extremely low in Asia by historical standards, has accelerated in recent months. The most significant turnaround has occurred in China. That country's inflation rate, though easing slightly in February, has jumped in recent months, including a 3.2% surge in January, compared with the year before. That comes after prices were nearly flat or declining through much of 2002 and 2003.</br></br>Price increases are also cropping up in some of the region's other major economies. In Japan and Hong Kong, for example, it appears that a long stretch of price deflation may be coming to an end, as consumers are now paying more for some goods. In South Korea, the higher prices have been particularly pronounced among exporters, as domestic consumer demand remains slack. The pattern of rising prices is even more evident in Thailand and the Philippines.</br></br>"We're kind of at a turning point" in consumer prices in Asia, says Rob Subbaraman, a regional economist at Lehman Brothers in Tokyo. "Broad inflationary pressures are beginning to build."