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Pricing pressures and production puzzles

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  • The US employment cost index is due. This is a better indicator of labour pressures on inflation than is average hourly earnings (every single worker in the US could receive a pay rise, and average earnings could still fall). We see 0.7%. GDP is revised, and we expect 2.7% with a drag from the government.
  • Euro area consumer price inflation is expected to be negative, but (as any good economist knows) negative inflation is not deflation. Deflation is a general price decline, and what we have in the Euro area is the effect of a relative oil price decline.
  • UK credit data is scheduled - the Bank of England has already been rather aggressive in tightening policy via mortgage regulation, but this has not impacted non mortgage consumer credit, which has been quite resilient.
  • Japanese industrial production and labour market data turned out to be positive. This is not translating into the domestic economy at the moment however, with household spending collapsing and household disposable income still negative. The production data may owe more to global demand than domestic.