Quite simply, we believe that the recent appreciation of many Asian and Latin American currencies, together with India and China's rapidly accelerating domestic inflation problems, are leading to a rise in consumer traded goods prices that has the ability to create higher inflation in the developed world, particularly given the West's post globalisation increased reliance on supplies of goods from these areas. At the same time, weak comparison periods, rising taxes and other public sector charges can also be expected to add to reported inflation rates. Hence, as the UK has already demonstrated, inflation rates may surprise on the high side in the near term despite what are still extremely weak global growth trends. To some, it may seem odd to some to report 'weak global growth trends' when the US has just reported a 5.7% annualised rate of GDP growth but we have a number of reservations over the use and interpretation of this particular number. While the reported stock building component within the GDP data appeared roughly in line with our expectations, the import component appeared rather too low to us, thereby suggesting the potential for a downward revision to the overall GDP growth rate from this source. Moreover, in the production-based version of the data, the first estimate will have been heavily reliant on large company surveys and we suspect that Ford's 30% rise in Q4 output may have been disproportionately influential in the formation of this first estimate of GDP. As more data becomes available from the still very weak smaller company sector, we suspect that there may also be more downward revisions to the data. However, these essentially technical issues do not form the basis of our concerns over the use and interpretation of the data.
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