New Zealand inflation hits 21-year hig

Associated Press, Wellington, New Zeland | Mon, 07/18/2011 9:17 AM

Inflation in New Zealand has hit a 21-year high of 5.3 percent.

Prices for food, airfares and housing were all up in the second quarter, according to the government agency Statistics New Zealand. The cost of vegetables, which are in short supply thanks to flooding in Australia's Queensland state, rose by nearly 7 percent in three months.

Part of the rise can be attributed to a 2.5 percent tax increase on all goods and services enacted by the New Zealand government last year.

The news Monday pushed the kiwi dollar higher and close to a 26-year high of just over 85 cents to the U.S. dollar. Investors see an increasing likelihood that New Zealand's central bank will raise its lending rate from 2.5 percent in an effort to counteract inflation.

Euro plunges after ECB holds steady on inflation

Associated Press, New York | Fri, 02/04/2011 8:26 AM | Business

The euro plunged Thursday after the head of the European Central Bank said long-term inflation in the 17-nation euro region was still in check. Stronger economic data in the U.S. also supported the dollar.

Investors had expected ECB President Jean-Claude Trichet to toughen up his warning on rising prices, which would signal that the ECB was closer to lifting interest rates than the other major central banks. The ECB left rates at 1 percent for the 21st straight month. Higher rates tend to support a currency.

The euro fell to $1.3639 late Thursday from $1.3798 Wednesday, retreating from a three-month high of $1.3861 struck on Wednesday. The euro has moved higher since early January after a long decline sparked by Europe's debt crisis. Previous comments from Trichet warning about inflation and investors' hopes that European Union policymakers will announce a better plan to counter the debt crisis has buoyed the shared currency.

EU leaders are meeting Friday, and may announce a plan then.

The dollar also rose broadly against other currencies after a slew of positive economic reports. The data showed that the U.S. service sector expanded at the fastest pace in five years in January, according to the Institute for Supply Management trade group, while orders to factories increased in December and retailers posted better-than-expected sales gains in January.

The positive economic news comes a day before the U.S. government releases a key jobs report. Economists expect it to show that employers added 146,000 jobs in January. A significantly stronger reading could catapult the dollar.

In other trading Thursday, the U.S. dollar was higher against most currencies.

The British pound dropped to $1.6148 from $1.6166, retreating from a three-month high of $1.6277 earlier in the day. The U.S. currency rose to 99.02 Canadian cents from 98.84 Canadian cents, and gained to 0.9450 Swiss franc from 0.9420 Swiss franc.

Meanwhile, the U.S. dollar remained flat at 81.63 Japanese yen Thursday.

China ups minimum wages, as inflation persists

The Associated Press, Beijing | Wed, 01/26/2011 11:31 AM | Business

Many Chinese cities are raising minimum wages for workers, fanning inflationary pressures while also seeking to soothe frustrations over price hikes.

The double-digit increases in major manufacturing centers like Guangdong, and the cities of Shanghai, Tianjin and Beijing follow wage hikes last year that have further raised labor costs, accelerating a shift by makers of inexpensive goods to lower cost places like Vietnam and Indonesia.

Shortages of workers in some areas and strikes and other protests by disgruntled young workers have also prompted authorities to push minimum wages higher, with most localities expected to follow suit.

A report released last week by the American Chamber of Commerce in Shanghai said that 85 of the companies responding believed that rising costs are hurting China's competitiveness compared with other developing countries.

China retains massive advantages such as the standard of its infrastructure and its own huge market, which increasingly is the focus of foreign companies manufacturing there. But surging costs for labor, land, energy and materials have prompted many making low-cost items such as toys, shoes and clothing to move some production to other parts of the developing world.

Tianjin's labor bureau, in a statement seen Wednesday on its website, said it is preparing to raise the city's minimum monthly wage to 1,070 yuan ($160) from the current 920 yuan ($140).

Shanghai's mayor, Han Zheng, confirmed last week that the city was preparing for an April 1 increase in the city's minimum wage, by more than 10 percent over the current monthly 1,120 yuan ($170).

Han described this as an effective way to ensure a "rational income distribution."

"It is our responsibility to raise wages in Shanghai because people living on those wages are having a really hard time," he told reporters during an annual news conference. "It is important for every worker to share the fruits of progress and harmonious labor relations are conducive to healthy businesses," he said.

Beijing has announced its minimum wage will rise by 20.8 percent this year. Jiangsu, an affluent region adjacent to Shanghai, is hiking its minimum monthly pay by 15 percent and Guangdong, by about 19 percent in March to 1,300 yuan (about $200) - the country's highest.

Mindful of past links between surging inflation and political unrest, the authorities have sought to reassure consumers that they have prices under control.

China's inflation rate was at 4.6 percent in December, down from a 28-month high of 5.1 percent the month before but well above the government's target of 3 percent. Annual inflation in 2010 was 3.3 percent, and many economists are warning that price hikes may persist in coming months, especially if recent bad weather keeps food prices above normal.

Asked if rising costs might discourage companies from investing in places like Shanghai, Han said he believed companies focus more on the local investment environment and their own business strategies than on labor costs.

"If the companies cannot afford such increases it means their business model is not suitable for the development pattern in Shanghai," he said.