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The upside risk to growth

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  • The US retail sales data, though expected to weaken on price effects, was sufficiently broad based in its weakness as to concern financial markets. Nonetheless we see upside risks to our 3.2% Q3 US GDP growth forecast, based on the full range of economic data releases.
  • The US Federal Reserve is in focus. Yesterday's Beige Book included some interesting anecdotes about selective labour shortages, reinforcing the idea of a labour market cleaved in two by skills. This would allow spare capacity and wage pressures to coexist.
  • Media reports suggested that Fed Chair Yellen is relatively upbeat about the prospects for the US economy, and for the duration of its recovery. We have no less than four Fed speakers today, no doubt all keen to give the wisdom of their views on the real world (not equity markets).
  • Euro area consumer price inflation is not likely to add much to market policy expectations. Trade data is a little dated, but to the extent that it gives signals about external demand may raise some interest. The Bank of England's Weale was sounding characteristically hawkish in the wake of UK labour market data.

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