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Stagflation! (not really)

| Posted by: Paul Donovan | Tags: Paul Donovan

  • No doubt it is just a matter of time before we start hearing "stagflation" from the financial media - although of course there is nothing like stagflation in the US. However, yesterday's data did signal ongoing wage strength in the labour market in the wake of weaker GDP. Not stagflation, maybe some inflation?
  • The Euro area is off celebrating workers (apparently without any sense of irony). The focus elsewhere is on manufacturing sentiment data. China's data was unchanged, but for China the focus must surely be shifting to the role of the consumer rather than manufacturing.
  • UK sentiment data should show resilience, but it is somewhat irrelevant as the politics continues to dominate. In the US the ISM is one of the leading examples of a sentiment index that overreact, but it still has status. One problem may be distinguishing real from nominal.
  • Japan's overtime pay and overall pay were both weak in March, in what is a bit of a blow for Abenomics (how many blows can Abenomics take?). Deflation in Japan has always been more about expectations of falling income than falling prices.