discuss the readings don\'t foresee a rate rise until the second quarter of 2011
ID: 343152 • Letter: D
Question
discuss the readings
don't foresee a rate rise until the second quarter of 2011. Other economists pre dict a hike even later than that. The big factor keeping a lid on infla tion is the jobless rate, which has stayed above 9 percent since May 2009. This held down wages and consumption. The Fed's preferred inflation gauge-the core China workforce to 5,000 from 25,000 price index, which strips out price hikes rate of 0.6 percent in the first quarter Retailers feel every day how weak Ark.-based Wal-Mart Stores cut prices on more than 10,000 items after sales at U.S. stores opened at least a year fell Jan. 31. Home Depot, the largest U.S prices in March on flowers, fertilizers, jobs have moved to China's interior or Inflation this low can sometimes slip into deflation. A drop in pricesef Manufacturing fectively boosts the cost of a loan, since a company finds it harder to generate As Wages Climb in the profit it needs to service its debt.China, Factories Move have almost doubled in the past three years, and more than half the factories The money supply, which grows roAlabor shortage is trimming nd co year, to 91 million. "This lack of labor ."Wal-Mart won't raise what they clining inflation. The broadest measure annual rate of just 1.4 percent in the 12 As costs climbed in Taiwan two de- months through April, vs. 8.4 percent a cades ago, Ben Fan moved his light year earlier. That's a clear sign that con ing factory to take advantage of China's higher wages are devastating profits, es sumers have switched from borrowing cheap labor. Now, with Chinese wages pecially as their customers continue to to saving. Says Gabriel Stein, a director on the rise, he's moving again. "It's justsqueeze them for lower prices. "Wal-Mart at Lombard Street Research in London:like what happened in Taiwan," says One of the signals of threatening deFan, chairman of Neo-Neon Holdings, Heng Toh, general manager of teddy bear flation is if money supply grows very which sells lamps and lighting fixtures producer Lovely Creations. Another slowly." We're not in a deflation zone to big retailers including Home Depot,Wal-Mart supplier, jewelry maker Profit yet, but economists in the Bloombeg Target, and Wal-Mart. "Chinese don't Grand, has cut its staff to 450 from 600 survey predicted inflation of only 1.2 want to work in factories anymore. won't raise what they pay us," says Poh- Hsu Chi Lin. Wages, Hsu says, have risen from 2 percent of total costs a decade ago Vietnam, where wages are $100 a month, Feroli, that rate hikes will be a long time one-third what he pays in China. He coming: "The inflation data continue to plans to shift 85 percent of his producto 12 percent today, while net margins tion across the border, and by December have fallen from 15 percent to about he'll have 8,000 workers in Vietnam-up8 percent. Factory owners are also wor from 300 a year ago-and just 5,000 in ried about a potential revaluation of Chi- China, down from 25,000 in 2008. The bottom ine InNation is low, and may slay low na's currency. The yuan is up 21 per- Over the past two years, millions of cent vs. the dollar since 2005, andExplanation / Answer
The article discusses the issue of labor in China. It has led to higher manufacturing cost and as other companies like WalMart are not willing to increase the price, it is impacting profit margins greatly
Some of the issues highlighted are:
Although, people do not want to move the entire operation out from China. They are willing to keep critical aspects of work at China which has higher margins.
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