Chinese inflation and the toy industry

When the Spanish Conquistadors brought gold home to Spain from the New World, the sudden influx of wealth caused rampant inflation. That is a bit like what is currently happening in modern China.

Money is pouring into China and, as with the 16th century Spanish, that means inflation and inflation ultimately means higher wages. Higher wages means higher prices for toys.

Here is how a New York Times article, "Inflation in China Is Rising at a Fast Pace," describes what is happening.

From street markets to corporate offices, consumers and executives alike in China are trying to cope with rising prices. The National Bureau of Statistics announced on Saturday that consumer prices in China were 3.5 percent higher compared with a year earlier, the largest increase in nearly two years.

To make matters worse, inflation over the short term also seems to be accelerating. A seasonally adjusted comparison of August prices to July prices showed that inflation was running at an annualized pace closer to 4.8 percent

The toy industry with its massive dependence on Chinese manufacturing will need to stay a jump ahead of what looks to be a continuing rise in the cost of producing toys in China. Consumers are going to have to pay more for toys as it will become increasingly impossible for manufacturers and importers to eat the rise in cost.

What will this mean for the toy industry? That will be in my next blog posting.