Commodity price declines have be raising questions about the risks of disinflation or deflation once again. At a consumer price level commodity prices should still be a positive contribution at the end of this year, because of base effects.
The relative unimportance of commodities to overall prices in a developed economy can be demonstrated readily. Commodity prices account for around 10% to 15% of a developed economy's consumer price index (including second round effects). Labour costs are 60% to 65%. Wages beat commodities.
German business sentiment is due from the ifo institute, and of course the question of contagion from the Greco-German crisis still lingers. We also have M3 money supply data from the Euro area which should confirm that the decline in bank lending continues to abate.
Durable goods orders, which include a capital goods subcomponent, are due from the US. The data is important, if a little overshadowed by the labour data on Friday. However, legitimate questions can be asked about whether investment spending is properly captured by capital goods data nowadays.
