US March CPI up 0.6 percent, China's Q1 GDP up 9.5 percent

So maybe inflation is rising in the US after all. Yesterday's March CPI report by the Labor Department shows that consumer prices rose 0.6 percent in March from February. Higher energy cost is the main culprit, but even the core rate that excludes food and energy was 0.4 percent, up from 0.3 percent in February.

David Altig at the macroblog points out that the median CPI rose only 0.2 percent from the previous month. Citing Mike Bryan at the Cleveland Fed, he said that "the dispersion in individual prices (excepting food and energy) was unusually large in the March data... With the rock-steady median CPI statistic, I'm going to suggest that maybe it's premature to be jumping to conclusions about whether or not the trend is getting away from us".

Altig also looked at the latest Beige Book report on regional conditions and finds indications of rising prices. However, he also noted that "the tone of the report regarding general economic conditions was almost cheery in light of the string of less-than-stellar reports we've been getting lately".

If things look hot in the US, they look positively hot in China. The National Bureau of Statistics announced yesterday that China's economy grew 9.5 percent in the first quarter, the same rate as for all of 2004.

Fixed asset investment increased 22.8 percent in the first quarter, just slightly slower than the 25.8 percent growth rate for 2004. "The total size of investment is too large," NBS spokesman Zheng Jingpin said

Expect to see more tightening in both the US and China.

I look at investor sentiment in the context of some of these recent economic indicators in my latest commentary "Economies stay hot but investor sentiment turning down".

References:

Weitz, Dodge, FPA -- Scary How Wary Top Funds Are

Fund managers turn pessimistic