I’m going to start with what might seem to be somewhat of a non sequitur if only because it’s one of those things you just have to laugh at. Researching historical cases and examples, I typically try to read as many contemporary thoughts or news articles as possible to gain a sense of what “everyone” was thinking at whichever times.

In light of today’s outer space CPI figures, it seemed appropriate to review the 2000 example which had displayed similar levels of transitory non-inflation “inflation.” Studying specifically that summer’s debate over inflation vs. recession, particularly how it was playing out as yet another titanic struggle between bonds and Economists (or analysts and “strategists”), I ran across this tidbit in a contemporary New York Times article:

”The conclusion that most people have is that the Fed is finished,” said Robert Bloom, president of Friends, Ivory & Sime, a money manager. But he said he disagreed, citing, among other things, a still-taut job market in which job growth is slowing because the pool of potential workers is drying up, not because demand for them has slackened. [emphasis added]

As it would turn out, the Fed was finished because weak data actually indicated, get this, weakness. That had obviously included the labor market stuff, so you have to chuckle how here twenty years ago and the LABOR SHORTAGE!!!! was already then being offered as a way to dismiss all those otherwise unmistakable signs in favor of inflation and the mainstream narrative unsupported by much beyond rhetoric and a surging CPI.

How some things never do change.

This includes China which is always considered to be the rock upon which whichever anticipated global recovery will be fashioned upon. That it never comes to actual recovery is never reconciled with how the Chinese economy since 2011 only underwhelms and underperforms the rhetoric offered for its condition.


Like today in the US, the Chinese yesterday issued some startling inflation figures. Though their CPI rates continue to be among the lows – food and pork prices are still falling from last year’s highs – it was instead producer prices and really those being charged at the figurative factory gate (the price index for industrial purchasers) which produced the necessary hype.

The general purpose PPI was up 6.8% year-over-year while the latter purchaser report shot upward at 9.0%. Both are the highest since early 2017.



That only makes it sound impressively inflationary, though, since the world goes through the same regime of quickly rising producer prices every time there’s a commodity-led reflationary condition – like early 2017 or 2010. It’s what normally happens during these periods, and so far there’s nothing extraordinary about it.

Rather, it’s the rest of China’s economy which hints at the underlying global factors we’ve talked about in global bond yields. The Chinese rebound began before anyone else’s and it’s said to be among the most enviable.

And while that may be true, the cleanest dirty shirt just so happens to be filthy itself. Not just recent general economy stats like underwhelming retail sales and a suddenly questionable industrial recovery, take also, for example, Chinese autos.

It had been the auto sector which first indicated big problems over there in 2018; while everyone over here was going on about “globally synchronized growth” and the inflationary acceleration potential supposedly that would bring, auto sales in China went the other way warning that, eventually, synchronized would end up being something else entirely.

Which is just what happened by 2019.

When you look at Chinese autos in 2021, the stats are indeed gigantic and impressive as they are elsewhere. Anytime anything is compared to almost complete shutdowns like those imposed in vehicle trade early last year, base effects are going to be ridiculous and therefore ridiculously unhelpful.

According to the China Association of Automobile Manufacturers (CAAM), the biggest market in the world for automobiles had sold only 224,000 units during February 2020 when economic restrictions in the country were at their worst. Therefore, when the same market managed 1.16 million sales the following February, three months ago, this 410% annual increase doesn’t tell us very much at all.

Even as it is literally off the chart:

That pace was not much more than half of the 2.04 million sold in January, and not quite two-thirds the 1.87 million posted during March. Both those other months showed impressive year-over-year increases, too, if on the same but lower base effects.

What we really want to know is how China’s auto market – therefore a key window into its overall economic condition – is really doing when compared to previous years. Is it more like how 2017 was supposed to lead to real strength in 2018 and 2019; or, still entirely too similar to how both of those latter years actually turned out?

Perhaps unsurprisingly, not the good one.

Once again, in context, another Chinese datapoint which points to more of the same post-2017 lackluster-ness. And this is following what had been in 2020 an actual recession, the first one in modern China. Where is the unambiguous, world-sustaining inflationary fire of money-fueled demand?

Its silence is deafening. A small rebound in the back half of last year, not even making up for lost activity in its first half, is not “strong.” Now 2021.

We keep hearing about how the Chinese are leading the way toward a global inflationary recovery if not more than that, and yet the evidence suggests that other than temporary factors like supply in commodities there’s just no reason to believe those will be sustained beyond any temporal distortions they might produce.

There’s a reason why producer and factory gate prices surged only in early 2017 before slowly then more quickly calming down all over again. There was nothing meaningful to the reflation beyond simple reflation; and now, compared to that one, another indication how today in 2021 there’s even less.

To bridge this divide and make it seem small and unimportant, however, “they” will continue to hype up China’s base effects or in America point to some LABOR SHORTAGE!!!! as if each might be the reason for disappointing weakness. At least so far as China and its automobile market goes, it still hasn’t recovered from 2018 let alone that plus 2020. In the US, we can still chuckle at the historical tradition of dismissing unenviable employment numbers.