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Costs creep up

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The Federal Reserve's Beige book signalled growing cost pressures for US companies, from a tighter labor market and US President Trump's barrage of tax increases. The Fed is likely to treat the trade taxes as it would any other tax – a temporary inflation driver that should be ignored, with a longer-term negative impact for growth. 
  • Japanese trade data showed slowing export growth. The pace of export growth is still consistent with stable or rising real global trade as a share of GDP, so not a trade war, but the slowdown does indicate the risks ahead. Falling import demand is a reflection of weaker domestic demand rather than trade taxes.
  • UK retail sales figures should be unaffected by political turmoil and the interminably tedious process of leaving the European Union – no one in the real world cares. Warm weather and football will be far more important.
  • The US Philly Fed business confidence survey is due, but it is a business confidence survey so it is of limited interest. Fed Vice Chair Quarles speaks, but this is just after we heard from Fed Chair Powell. Moreover, Quarles and Powell are both lawyers, not economists. If they were economists, then their remarks would naturally have more importance.