Slowing China's Inflation - Speeds U.S. Inflation

Article yesterday on Bloomberg.com about how the Chinese government has taken steps to slow down its overheated economy. Specifically the government is limiting bank lending, which immediately led to a slowdown in manufacturing (China's Purchasing Manager's Index shrank from 55.2 to 53.9 surprising most analysts).  

Good for China, but the direct impact on the U.S. (specifically the office furniture industry) will be a continued rise in the cost of imported office furniture. We've seen prices on imported furniture rise steadily since mid 2009 due primarily to transportation cost increases. Now add increased financing costs and a slow down in production, and I expect to see at least two wholesale price increases from our import  vendors in 2012.

Price Increases are here...

Lots of talk on the macro-economic level about falling prices and the risk of deflation. Evidently the office furniture industry hasn't heard the chatter. We are seeing wholesale price increases - both from our large and small vendors.

Our largest domestic vendor (+1BN in revenues) recently implemented a "weighted" 4% price increase (which means some items don't go up at all, and some items go up a lot). This vendor sited increased steel and commodity costs as the primary reason for the increase, and they expect their competitors to follow suit.

A large importer also recently announced a pending price increase (between 0% and 15%), scheduled for September 1. No specifics on what is driving the import increases, but I would wager that increased shipping costs (container and transit costs), along with wage increases in China, and increasing commodity prices, will drive up overall retail costs between 10% to 15% over the next 18 months.