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Inflation, deflation (and disinflation, if you are into that sort of thing)

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  • Spain and Germany offer deflation and inflation numbers respectively - highlighting the dilemma faced by the ECB as it struggles to run a dysfunctional monetary union. Note that negative CPI is not competiveness enhancing - it is negative unit labour costs that enhance competitiveness.
  • German Finance Minister Schaeuble says ECB President Draghi's Jackson Hole deflation concerns have been "over-interpreted". As we must all hope Draghi did not coordinate his comments with the German finance ministry, "over-interpretation" can only be Schaeuble's interpretation.
  • Euro area M3 money supply data is of some interest as a signal of the willingness of banks to lend. Business and consumer confidence is due, and markets are likely to be braced for disappointment following weaker national data yesterday.
  • The Americans are revising their Q2 GDP growth figures. We believe inventories will drag down the headline a little to 3.9% (annualised) which is not going to worry the markets. Final demand should be stronger.

Listen to the audio version of this briefing.