Friday, April 11, 2008

US importing inflation

The dual coincidence of a falling dollar and rising inflation in emerging economies is putting upward pressure on the prices of American consumption imports from them. Since developing countries now produce nearly half of all American imports, the higher prices contribute a significant share to American inflation. The falling dollar is making imports more expensive, while the rising inflation in the producing countries is incraesing their production costs. The NYT chronicles this change here.

So far the Asian exporters had been taking cuts in their bottomlines, rather than pass on the increasing costs to the American consumers. Now, with no end in sight to the declining dollar, exporters appear to be no longer willing to subsidize the American consumers.

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