I keep repeating that those looking for “inflation” where by prices or by credit expansion, need to look at China, not the US. Please consider China’s Inflation Accelerates to 5.5%

China’s inflation accelerated to the fastest pace in almost three years in May and industrial production rose more than estimates, sustaining pressure for a further interest-rate increase.

The 5.5 percent annual gain in consumer prices matched the median forecast in a Bloomberg News survey of economists. Production rose 13.3 percent, exceeding a median 13.1 percent forecast. Fixed-asset investment quickened, according to statistics bureau data released in Beijing today.

Food prices rose 11.7 percent from a year earlier as pork and vegetable costs surged.

Inflation has exceeded the Chinese government’s 4 percent target each month this year as companies including McDonald’s Corp. boost prices. Still, the pace remains the slowest of the so-called BRIC nations, with the latest data showing annual rates of 6.6 percent for Brazil, 9.6 percent for Russia and 8.7 percent for India.

China’s producer prices rose a more-than-estimated 6.8 percent in May and non-food inflation accelerated to 2.9 percent, the fastest pace in at least six years, today’s data showed.

The increase in industrial output compared with April’s 13.4 percent expansion from a year earlier. Retail sales, which are boosted by inflation, rose 16.9 percent after a 17.1 percent gain in April.

Fixed-asset investment excluding rural households expanded 25.8 percent in the first five months of the year, up from 25.4 percent in January-through-April.

Peak Oil Will Slow China

Fixed investment in China is soaring even though infrastructure projects make little to no economic sense. The result is exactly what one would expect: inflation.

However, what cannot go on won’t.

Please consider the energy bulletin article China’s Energy Future by Robert Rapier.

China uses about two barrels a year of oil per person. In the United States we use 23 barrels of oil per person per year. If China’s usage grew to the U.S. equivalent, it would be 85 million barrels a day, which is about the total consumption of oil for the world.

There will be a major disaster long before China consumes anywhere close to that amount. Yet China bulls insist China will keep growing at the same rate. Peak oil says it’s not remotely possible.

Mike “Mish” Shedlock
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