While consumer price inflation popped in China in March, income inflation also surged higher over the first three months of 2011. Data released today shows a 12.3% year-over-year spike in disposable income in Q1 in urban China.
That’s likely to be good news for those betting on the Chinese consumer thesis. Income inflation beat overall inflation by 7.1%, so there was plenty of spare cash to be spent on more goods and services.
But it’s also a sign that companies in China are having to pay higher wages to their workers. Those costs will likely be passed through to U.S. consumers in the coming months, and are forcing big international firms to reconsider their plans for production facilities in China.