inflation

Bucks Blog: Wealthy Donated Less but Volunteered More in 2011

October 31, 2012 by NewsMaker Leave a Comment

The “1 percent” have taken some lumps over the last year or so. But despite a dip in overall philanthropic giving, the majority of the wealthy donated a consistent proportion of their income to charity last year, a new study finds.

Ninety-five percent of wealthy households donated to charity last year, according to the 2012 Bank of America Study of High Net Worth Philanthropy. That is down from 98 percent in 2009, in a previous version of the study. (About 65 percent of the general population of United States households donate to charity, the study said.)

But the wealthy still gave roughly 9 percent of their incomes — about the same level as in 2009, the study found. Given the recent recession, that level of giving shows an “extraordinary” commitment to philanthropy, said Claire Costello, philanthropic practice executive for U.S. Trust, Bank of America Private Wealth Management. The average dollar amount given per household fell 7 percent, to $52,770 from $56,621, adjusted for inflation.

The study also showed an uptick in volunteering among the wealthy, suggesting that the affluent may have compensated for lower dollar donations by giving more of their time. In 2011, 89 percent of wealthy individuals volunteered with nonprofits, up from 79 percent in 2009.

The study was done in partnership with the Center on Philanthropy at Indiana University. The results are based on a nationwide sample of 700 households with net worths of $1 million or more, excluding the value of their homes, or annual household incomes of $200,000 or more.

About a quarter of wealthy households plan to increase their giving over the next three to five years, and about half said they planned to give at the same level, the study found.

How much of your income do you donate to charity?

Article source: http://bucks.blogs.nytimes.com/2012/10/30/wealthy-donated-less-but-volunteered-more-in-2011/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: dollar donations, inflation, worths

Economix Blog: New York State Leads in Income Inequality

September 21, 2012 by NewsMaker Leave a Comment

CATHERINE RAMPELL

Dollars to doughnuts.

Of all American states, New York again has the most unequal income distribution, according to a new report from the Census Bureau. Wyoming has the most equitably distributed income.

Source: U.S. Census Bureau, 2011 American Community Survey. A state abbreviation surrounded by a circle denotes the value for the state is not statistically different from the overall country’s Gini index.

Income inequality is measured by the Gini index, which runs from zero to one. A zero represents a society where income is distributed exactly proportionally among every household. A one indicates maximum inequality, where one household has all the income and all the others have none.

The Gini index value for the United States in 2011 was 0.475, higher than it was in 2010 at 0.469. The index rose in 20 states last year (including New York); there was no statistically significant change in the rest of the states and the District of Columbia (which, at 0.534, has a higher index value than any state).

The Gini index value for New York State was 0.503, which means the state’s household incomes are about as equally distributed as those in Costa Rica, at least according to the most recent international data available.

The report also looked at median household incomes across the states, which showed great inequality among states as well as within them. The median household income ranged from a low of $36,919 in Mississippi to a high of $70,004 in Maryland.

As previously reported, the national median income fell from 2010 to 2011. There was only one state in which it rose a statistically significant amount, after adjusting for inflation: Vermont, where the median household income was $52,776 in 2011 after having been $50,707 in 2010.

Article source: http://economix.blogs.nytimes.com/2012/09/20/new-york-state-leads-in-income-inequality/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: american states, economix, inflation

Bucks Blog: Suggested Retirement Savings Goals, by Age

September 12, 2012 by NewsMaker Leave a Comment

For those of you wondering if you’re saving enough money for retirement, here are some new savings guidelines to ponder.

Fidelity Investments has recommended that most workers should strive to save at least eight times their final salary before they retire to adequately prepare for retirement. (Saving that amount puts you on track to replace 85 percent of your salary, Fidelity says.)

Now, the investment firm is suggesting earlier milestones to help you get to that eight times goal by the time you’re 67.

Namely, Fidelity suggests workers should aim to save about one times their salary at age 35, three times at age 45 and five times at age 55.

So if you’re 45 and you’re making $50,000 a year, you should have put away $150,000.

“We believe these savings targets offer a rule of thumb to help employees get engaged in retirement planning by making it simpler and more achievable, but we recognize many individuals may need more than eight times their ending salary in retirement based on their lifestyle,” James M. MacDonald, president of workplace investing at Fidelity, said in a news release.

The company’s savings guideline is based on an employee in a workplace retirement plan, like a 401(k), beginning at age 25, working and saving continuously until age 67 and living until age 92. The goal would include savings in all retirement accounts, like 401(k)’s and I.R.A.’s, as well as other savings.

The calculation includes several assumptions, like a lifetime average annual portfolio growth rate of 5.5 percent and income growth of 1.5 percent a year over inflation with no breaks in employment.

So, all of you out there who are 35, 45 and 55(ish), are you anywhere near those targets? How did you do it?

Article source: http://bucks.blogs.nytimes.com/2012/09/12/suggested-retirement-savings-goals-by-age/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: inflation, rule of thumb, salary

Economix Blog: Why the Minimum Wage Doesn’t Explain Stagnant Wages

September 5, 2012 by NewsMaker Leave a Comment

Until the mid-1980s, only a single state – and one of the smallest in population, Alaska – had set a minimum wage higher than the federal minimum. But with the federal minimum remaining unchanged at $3.35 an hour for most of the 1980s, more states began to set higher floors for wages.

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A closer look at big issues facing the country in the 2012 Election.

Economy, Planet, Security, World and Health.

By the end of the 1980s, a dozen states had their own, higher minimum wage. By 2008, 32 states did. The number has fallen to 18 today, because the federal minimum has risen since 2008 – it’s now $7.25 an hour – and overtaken some state minimums, but the 18 include several large states. In Illinois, the minimum wage is $8.25. In California, it is $8. In Florida, it is $7.67.

As a result of these state minimum wages, the federal minimum is not as important as it once was. It applies to less than 60 percent of the population.

In this space, we have been examining the causes of the American income slowdown – over both the last decade and the last generation – and our recent list of 14 possible causes included the stagnation of the federal minimum wage. That stagnation certainly matters: in 1968, the minimum wage was 45 percent higher than it is today, adjusting for inflation.

But I think it’s fair to say that the minimum wage is not one of the most important causes of the income slowdown. The minimum wage instead belongs on a list of secondary causes. It probably did play a substantial role holding down the pay of low-income workers in the 1980s and in increasing inequality, as research by David S. Lee and others has found. But its role seems to have been much smaller in the last two decades.

I’ll confess that I did not expect to come to this conclusion. When we started this project, I assumed that the minimum wage would have played a larger role. If others think it has, we welcome hearing from them.

The crucial point is that the minimum wage has risen, even after adjusting for inflation, over the last 20 years. The reason it is so much lower now than in the late 1960s is that it declined so much from the late ’60s through the late ’80s.

The effective minimum wage today – a national average taking into account both the federal and state minimums – is about $7.55, which is more than 10 percent higher in inflation-adjusted terms than the effective minimum in 1990. Today’s effective minimum is also about 7 percent higher than in 2000.

Yet the overall pay of people at the bottom of the income ladder has been virtually unchanged since 1990, according to Census Bureau data. And pay at the bottom (as well as the middle) has fallen since 2000. The rising tide of the minimum wage, to use President John F. Kennedy’s formulation, has not kept most boats from falling.

Why doesn’t the federal minimum wage matter more than it does?

For all the economy’s problems, American society is still richer than it was a generation ago, with fewer low-wage workers. As a result, fewer are subject to the minimum wage than would have been the case in the past. The biggest changes have occurred among women.

In the 1970s, women made up the great majority of minimum-wage workers. But as women’s pay has risen, the share making the minimum wage has dropped sharply. Over all, about 5 percent of all hours worked in 2009 were paid the minimum wage or less (some businesses, like restaurants, are exempt). That was down from 8 percent of hours in 1979, according to research by David Autor of the Massachusetts Institute of Technology, Alan Manning of the London School of Economics and Christopher L. Smith of the Federal Reserve.

The decline is almost entirely the result of rising women’s wages. About 4 percent of men’s hours are paid at or below the minimum wage, down only slightly from 5 percent in 1979. For women, the decline was much bigger: to 6 percent, from 13 percent.

None of this is meant to suggest that the minimum wage is irrelevant. It affects not only minimum-wage workers but also those paid slightly more, who often receive raises when the minimum rises. If Congress increased the minimum wage to its inflation-adjusted 1968 level, a large number of poor people would receive a raise. Some would also lose their jobs, if their employers decided they could not profitably pay the higher wage. But research suggests that modest increases in the minimum wage do not have a large effect on employment.

All in all, a higher minimum wage would probably lead to a rise in pay for lower-income workers in general and a decline in inequality.
The 1980s help make that case in reverse. The federal minimum did not change from 1981 to 1990, causing its inflation-adjusted value to fall 30 percent during that time. Wages in the bottom of the income distribution fell sharply, even more sharply than they have in the last decade. The inflation-adjusted wage of a worker at the 20th percentile of the distribution dropped 9.5 percent from 1981 to 1990, according an analysis of government data in the forthcoming book “The State of Working America, 12th Edition,” by the Economic Policy Institute.

Mr. Lee, a Princeton economist, argues that the minimum wage accounted for “much of the rise” in inequality in the bottom part of the income distribution in the 1980s. David Card of the University of California, Berkeley, and John DiNardo of the University of Michigan have made a similar argument. Mr. Autor, Mr. Manning and Mr. Smith suggest the effect was smaller but agree it existed.

Since 1990, though, the minimum wage has risen. If you’re trying to understand why every income group except for the affluent has taken an income cut over the last decade, you probably shouldn’t put the minimum wage at the top of your list of causes.

In coming weeks, our look at other causes will continue.

Article source: http://economix.blogs.nytimes.com/2012/09/05/why-the-minimum-wage-doesnt-explain-stagnant-wages/?partner=rss&emc=rss

Filed Under: Business News Tagged With: closer look, inequality, inflation

Economix Blog: A Critique of Fed Policy

August 31, 2012 by NewsMaker Leave a Comment

Many economists regard asset purchases as the most powerful tool the Federal Reserve could use to stimulate the economy. But Michael Woodford, an economics professor at Columbia University, argued Friday that a second option would actually be much more effective – both because it would have significant economic benefits, and because the benefits of asset purchases are significantly overstated.

The option favored by Professor Woodford is a modified version of the Fed’s statement that it intends to keep interest rates near zero until late 2014. In a paper presented at the annual monetary policy conference in Jackson Hole, Wyo., he said that the Fed should instead declare its intention to hold down interest rates until the economy meets certain benchmarks, like a specified increase in economic output. In other words, to increase growth now, the Fed must promise to tolerate higher inflation later.

The Fed’s chairman, Ben S. Bernanke, has repeatedly resisted similar ideas, but in a separate speech at the conference earlier on Friday, he appeared to suggest a greater receptivity.

The core of Professor Woodford’s argument is that changes in Fed policy can happen for two reasons: either its economic outlook changes, or the Fed decides to change the way that it responds to a given economic outlook – in other words, a change in strategy, or in circumstances.

The Fed has described its forecasts as reflecting a change in circumstances, not strategy. It has said that it is simply describing the way that it is most likely to act if the economy slogs along at the pace it presently predicts.

Professor Woodford writes that this is at best ineffective and potentially even damaging. It can be described as an effort to push down interest rates by convincing investors that the economy will remain weaker for longer than they had previously believed. But investors may not regard the Fed as having better information about the economic future. And if they do take it seriously, the implications are negative: The situation is worse than they thought, while the planned response is unchanged.

“Forward guidance of this kind would have a perverse effect, and be worse that not commenting on the outlook for future interest rates at all,” he said.

What can work, he writes, is promising to behave differently. In the current situation, where the Fed would push rates below zero if it could, he argues that the proper response is to promise that it will refrain from raising interest rates above zero as quickly as circumstances would otherwise warrant.

“One wants people to understand,” Professor Woodford writes, “that the central bank’s policy will be history-dependent in a particular way — it will behave differently than it usually would, under the conditions prevailing later, simply because of the binding constraint in the past.”

Charles Evans, president of the Federal Reserve Bank of Chicago, has embraced a version of this approach, arguing that the Fed should maintain interest rates near zero until the unemployment rate falls below 7 percent or the rate of inflation rises above 3 percent. Professor Woodford says this would be an “important improvement,” but he prefers a different approach, tying Fed policy instead to a minimum rate of growth in the nominal gross domestic product (N.G.D.P.), meaning economic growth plus inflation.

Christina D. Romer, former chairwoman of President Obama’s Council of Economic Advisers, has explained the virtues of N.G.D.P. targeting.

Mr. Bernanke has generally resisted proposals for the Fed to shift its policy framework – and he has specifically branded as “reckless” ideas that would raise the Fed’s inflation target, like N.G.D.P. targeting.

But he has also said that in periods of high unemployment the Fed sometimes should move more slowly to restrain rising inflation, and in his speech Friday he appeared to underscore that the Fed, at least in part, is trying to tell markets it plans to move more slowly.

He began with his usual description of the Fed’s policy forecast as consistent with its standard decision-making framework. But he added that “a number of considerations also argue for planning to keep rates low for a longer time than implied by policy rules developed during more normal periods.”

Mr. Bernanke then made the further claim that the Fed was already sending this signal to markets, and that it was being received.

He noted in particular that a regular survey of economic forecasters has documented a steady drop in their estimate of how low unemployment must fall before the Fed’s policy-making group, the Federal Open Market Committee, begins to withdraw its stimulus.

The evidence, he said, “appears to reflect a growing appreciation of how forceful the F.O.M.C. intends to be in supporting a sustainable recovery.”

Article source: http://economix.blogs.nytimes.com/2012/08/31/a-critique-of-fed-policy/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: economic outlook, inflation, monetary policy

Bucks Blog: A Calculator to See if You’ll Be Snared by the A.M.T.

December 1, 2011 by NewsMaker Leave a Comment

Bloomberg News

Right after the holiday season comes tax season. So to help you with your year-end tax planning, Kiplinger is offering a new calculator to help you determine if you will fall prey to the dreaded alternative minimum tax.

The A.M.T. was originally created to make sure the wealthiest Americans paid at least some income tax. But because it has never been indexed to account for inflation, it now snags many middle-class taxpayers.

To use the calculator, you’ll need a few pieces of information:

What you expect your 2011 taxable income will be (you can use line 43 from last year’s 1040 if you had no significant changes this year).
The number of exemptions you will claim for yourself and your dependents.
Whether you choose the standard deduction, or itemize deductions.
If you itemize, you will also need to know roughly how much you paid in real estate taxes and state income taxes (or state sales taxes) that you normally deduct on your tax return.

Plug in those numbers—and let us know in the comments if you found the calculator helpful.

Article source: http://feeds.nytimes.com/click.phdo?i=3661615582517843112dea042180ac49

Filed Under: Your Money Tagged With: holiday season, inflation, middle class taxpayers

European Central Bank, Under New Chief, Cuts Key Rate

November 4, 2011 by NewsMaker Leave a Comment

Two days after assuming office in one of the most turbulent phases in the history of the euro zone, Mr. Draghi signaled that he might be more willing than his predecessor, Jean-Claude Trichet, to tolerate inflation in the name of economic growth. The bank cut the benchmark rate to 1.25 percent from 1.5 percent, a move aimed at putting more money into the European economy by making borrowing easier.

Investors cheered the decision by pushing stocks higher in Europe and the United States.

The cut, which surprised some analysts, may signal a shift in strategy — or at least in tone — at the bank, which oversees monetary policy for the 17 European Union nations that share the euro. Known for his caution, Mr. Draghi, formerly the governor of the Bank of Italy, was not expected to make bold moves so soon.

But speaking to reporters after he presided as chairman of the bank’s governing council for the first time, Mr. Draghi indicated that he felt he had little choice but to reduce interest rates. He warned that economic growth was likely to be significantly worse than the bank expected. That assessment came a day after the Federal Reserve also reduced its growth forecasts through 2013.

While campaigning this year to succeed Mr. Trichet, Mr. Draghi emphasized his credentials as an inflation fighter and as a voice of fiscal prudence in his native Italy. But on Thursday, he played down the risks posed by inflation, which at a current annual rate of 3 percent is above the bank’s target of about 2 percent. Slower growth, he indicated, would act as its own curb on inflation.

“In such an environment, price, cost and wage pressures in the euro area should also be moderate,” he said. “Today’s decision takes this into account.”

At the same time, though, Mr. Draghi disappointed those who want the bank to help calm skittish global investors by aggressively buying European government bonds, using its ability to print money to reduce the risk that the Greek crisis might create a contagion infecting Italy, Spain and others. He stuck to the position that the bond purchases the bank has been making since the spring of 2010 were temporary and limited, and justified solely as a way for the bank to maintain its control over interest rates.

Rather, Mr. Draghi said, it was up to national leaders to regain investor confidence by reining in spending and removing excessive regulations and other obstacles to growth. “The first and foremost responsibility for maintaining financial stability lies with national economic policies,” he said.

Mr. Draghi’s statements on bond market intervention led some analysts to conclude that, despite the rate cut, he would not veer significantly from the path set by Mr. Trichet. Mr. Draghi described his predecessor on Thursday as a “role model.”

The bank has spent 173.5 billion euros, or $240 billion, intervening in bond markets since May 2010, a modest sum compared with the securities purchases made by the Fed or the Bank of England to help prop up their own financial markets and stimulate their economies.

“The E.C.B. seems to be continuing to play its dangerous game of doing the minimum amount possible, counting on the European politicians to extinguish the fire,” Jens Sondergaard, an analyst at Nomura, wrote Thursday in a note to clients.

Still, some analysts said that Mr. Draghi’s statements on bond buying should not be taken at face value and that the bank would intervene if necessary to save the euro.

“If worse came to worst, the E.C.B. would buy government bonds on a massive scale,” Jörg Krämer, chief economist at Commerzbank in Frankfurt, wrote in a note.

But Mr. Draghi cannot say that out loud, the thinking goes, for fear that leaders like Prime Minister Silvio Berlusconi of Italy would renege on promises to remove barriers to competition and improve economic performance.

“It is understandable that they don’t want to give governments a free lunch,” said Marie Diron, a former European Central Bank economist who advises the consulting firm Ernst Young.

Article source: http://www.nytimes.com/2011/11/04/business/global/european-central-bank-cuts-rates-hoping-to-avert-downturn.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: benchmark rate, euro zone, inflation

Consumer Spending Jumped 0.6% in September

October 28, 2011 by NewsMaker Leave a Comment

Consumer spending rose 0.6 percent last month, the Commerce Department said Friday. The gain was driven by a big rise in purchases of durable goods, such as autos.

Consumers earned only 0.1 percent more after their income fell by the same amount in August. And after adjusting for inflation, their after-tax incomes fell 0.1 percent last month — the third straight monthly decline.

As a result, they saved less. The savings rate fell to 3.6 percent, the lowest level since December 2007.

Expectations were high after the government said Thursday that consumer spending helped fuel annual growth of 2.5 percent in the July-September quarter, the best quarterly expansion in a year.

Consumer spending is closely watched because it accounts for 70 percent of economic activity. It grew at an annual rate of 2.4 percent in the third quarter. That’s more than triple the growth in the April-June quarter.

The economy would have to grow at nearly double the third-quarter pace to make a dent in the unemployment rate, which has stayed near 9 percent since the recession officially ended more than two years ago.

Economists doubt consumers can keep spending like they did this summer without earning more. Many are struggling with higher prices for food and gas. For spending gains to be sustained, employers need to step up hiring.

In recent months, job growth has stagnated. Employers have added an average of only 72,000 jobs per month in the past five months. That’s far below the 100,000 per month needed to keep up with population growth. And it’s down from an average of 180,000 in the first four months of this year.

Employers added only 103,000 jobs in September, and the unemployment rate remained 9.1 percent for a third straight month.

The government releases the October employment report on Nov. 4.

And spending could tumble next year if Congress fails to extend a Social Security tax cut, which gave most Americans an extra $1,000 to $2,000 this year, or long-term unemployment benefits. Both expire at the end of the year.

Paul Ashworth, chief U.S. economist for Capital Economics, predicts that overall growth will cool in the fourth quarter and next year. He predicts growth of just 1.5 percent for all of 2012.

Mark Zandi, chief economist at Moody’s Analytics, is more optimistic. He expects roughly the same 2.5 percent growth in the October-December quarter and also in the first three months of next year.

Article source: http://feeds.nytimes.com/click.phdo?i=6ff30df43457ddb1a3ef8d799c305b25

Filed Under: Business News Tagged With: commerce department, durable goods, inflation

Fed Chief Raises Doubts on Recovery

October 4, 2011 by NewsMaker Leave a Comment

Mr. Bernanke said that the Federal Reserve has acted forcefully to support growth and that it stood ready to do more. But he emphasized that the rest of the government also needs to act on problems including the federal debt, unemployment, housing, trade, taxation and regulation.

“Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy,” Mr. Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policy makers.”

Mr. Bernanke began his testimony Tuesday by repeating his basic assessment that the economy has grown more slowly than expected, because of unexpected setbacks like the Japanese earthquake and the European debt crisis and because of domestic problems like the ongoing housing crisis.

“The recovery from the crisis has been much less robust than we hoped,” he said, although he also reiterated that the Fed expects faster growth going forward.

The Fed’s primary policy focus is on the pace of price increases, or inflation, which it seeks to maintain at a steady annual rate of about 2 percent. Prices have increased more quickly over the last year, but the Fed has predicted that the increases will abate, and Mr. Bernanke reiterated that forecast Monday.

But Mr. Bernanke’s description of the economic outlook sounded slightly more worried. He has previously said that the economy would recover so long as the government did nothing to interfere, for example through severe short-term spending cuts. On Tuesday, he seemed to suggest that the government needed to act to preserve the recovery.

“We need to make sure that the recovery continues and doesn’t drop back,” Mr. Bernanke told the Joint Economic Committee.

Mr. Bernanke said that the Fed has not exhausted its options.

The central bank, he said, “is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability.”

But his emphasis once again was on the need for the rest of the government to act.

He said that the government should keep four goals in mind: reducing debts to a level that was sustainable in the long term; avoiding short-term reductions that could impede recovery; adjusting spending and tax policies to support growth; and improving the government’s decision-making process.

“There is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy,” Mr. Bernanke said.

Article source: http://feeds.nytimes.com/click.phdo?i=535f2730813b3a8254f4849879186da9

Filed Under: Economy News Tagged With: federal reserve, inflation, price increases

China Inflation Rises Less Than in Previous Month

September 9, 2011 by NewsMaker Leave a Comment

The government’s Consumer Price Index rose by 6.2 percent over the previous August, according to the National Board of Statistics. That compares with a 6.5 percent rise in July. Producer prices were up 7.3 percent, slightly less than 7.5 percent jump in July.

Analysts cautioned, however, that inflation was likely to remain a long-term problem in a fast-growing economy in which middle-class demand for food and goods was rising and once-cheap manual labor was becoming more expensive.

Taming inflation has been the top economic priority of China’s leaders, who fear that high prices could fuel social unrest. Evidence that price increases are slowing down gives them some leeway to address the impact on of economic problems in the West, which are likely to reduce the exports on which China’s growth depends.

Inflation is “down but not out,” Alistair Thornton, a China analyst at IHS Global Insight, wrote in an early analysis of the state figures. Part of the decrease, he said, came from easing price increases for pork, one of the nation’s staple foods.

Food prices, which account for about a third of the Consumer Price Index, rose by 13.4 percent that month when compared with the previous year. But inflation in goods other than food actually rose last month to 3 percent, a 10-year high , he said.

“A lot of people have made the argument that China’s inflation is not concerning because it’s all food prices, all weather and supply shocks — bad harvests and the like,” Mr. Thornton said. “But the fact that non-food inflation is the highest it’s been in over a decade indicates there is something significant there.”

The government has been aggressively working to tame inflation for much of the year. China’s central bank, the People’s Bank of China, has repeatedly raised interest rates and bank reserve requirements to drain excess money out of the system, and restricted purchases of property to dampen land speculation. the latest figures show that new-home prices dropped or remained steady compared to June in 31 of 70 major cities, and average residential land prices declined nine percent month-on-month.

The government originally pledged to keep the annual inflation rate under four percent in 2011, but Premier Wen Jiabao, the top economic policy maker, more recently said the hope now is to keep it beneath five percent.

Signs of moderating inflation may enable the government to turn its attention to stimulating domestic demand, a move Western economic policymakers have urged China to make for years, J.P. Morgan wrote in a note on the latest figures.

“Support for domestic demand will come from the consumer side through employment growth, rising wages, and a higher individual income tax threshold and from the investment side through social infrastructure projects, such as the affordable housing program, water infrastructure and agricultural investments,” the firm’s China expert, Jing Ulrich, wrote.

A shift to domestic demand would help China’s economy weather any drop in exports related to slowing demand for good in the economically sapped West.

China’s stock markets rose in early trading, apparently in response to the better news on inflation.

Article source: http://www.nytimes.com/2011/09/09/business/global/china-inflation-rises-less-than-expected.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: food prices, inflation, producer prices