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Beige Book - why it matters

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US revised second quarter productivity and unit labour cost data is due. Domestic unit labour costs dominate inflation in any industrialised economy – but the trend of the data is what matters. The volatility of reported GDP (we revised up our US forecast for this year) suggests downward revisions to the cost figures.
  • More timely, perhaps, is the Fed's Beige Book of economic anecdote. This stage of the recovery is more about smaller businesses reviving, and this is a sector that is poorly served in the official data. Like all surveys there will be some "gaming" of responses (especially around currencies), but the Beige Book is generally a reasonable indicator.
  • The Euro area is offering producer price inflation, which is not likely to attract too much attention. There are some pricing pressures in some parts of the Euro area, but they appear to be more at a consumer than at a producer level.
  • Australian second quarter GDP was in line with UBS expectations, but below the market consensus. Domestic consumption and government capital spending led the 2% yoy growth figure, with China as a brake on exporters. How the changes in the composition of China's growth impact Australia in the future will be interesting.