The relative unimportance of commodities
- 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.