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Simultaneous deflation and rampant inflation

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Japan showed ongoing deflation in consumer prices (mainly an energy effect). The Bank of Japan's challenge is that has a deflationary reality, but consumers who are convinced that Japan has the highest inflation in the developed OECD.
  • Japan's quarterly Tankan business sentiment showed a divided corporate sector, as ever. Large companies are generally OK about life. Small businesses are generally far less enthusiastic.
  • Euro area and UK manufacturing PMI sentiment data is purely decorative – a reflection of an unattainable past, cast with all the nostalgia of a Rupert Brooke poem. UBS revised down UK and Euro area growth forecasts in the wake of last week.
  • The US ISM business sentiment may be more relevant to markets as the US is less directly impacted by events in Europe, and because the first half of the year has seen strong growth and upward revisions to growth (inevitably), buoying the US economic position.