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Lack of slack

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Japan's data deluge showed consumer price inflation remains a very, very long way from the magic 2% level the BoJ is supposed to target. Meanwhile, cunningly buried beneath the torrent of data, household spending was reported at a rather dire -2% yoy rate.
  • The US gives us labour market data. Not the payrolls report (that is next week) but the employment cost index. This should indicate sufficient wage pressures as to signal the lack of slack in the labour market (at least for higher skilled workers), warranting a rate rise.
  • The Chicago PMI of manufacturing sentiment is due, and there is an expectation of a modest gain. However, the normal volatility of sentiment data - the tendency to overreact - is compounded by the movement of the dollar – another strong month – which may undermine the signals the data sends off.
  • German retail sales figures were mixed: the history was revised weaker, the latest data showed a strong bounce back. Overall domestic demand has been a larger than expected part of the Euro area growth story, so this data should be in focus.