- US August consumer price inflation is due. Consumer prices do not measure the cost of living. Fantasy numbers in US CPI calculation further divorce this price measure from the cost of living. However, the Fed’s June policy error elevated the importance of consumer price inflation. Disinflation and deflation in durable goods, the longest period of gasoline price deflation for years, and some evidence of squeezing profit margins all suggest a lower reading.
- Broader disinflation will not stop the Federal Reserve tightening policy. Chair Powell’s Fed is committed to conventional economic thinking. At a time of considerable structural change, this may not be ideal. Some unconventional thinking might be welcome in policy today.
- UK labor market data showed the number of jobs (not the same as people employed) exceeded pre-pandemic levels, but the number of vacancies had the biggest decline since the pandemic. The cost of living may be pushing people into the workforce. Real earnings remain very negative in spite of bonus payments.
- The German ZEW business sentiment numbers are due. From the US, we also get fiscal budget numbers. Conventional data may not capture every economic change but tax authorities are relentless, making this a signal of real activity.