Goldilocks, or not?

Financial markets have continued to gravitate toward the ‘Goldilocks’ scenario where economic growth is neither “too hot” nor “too cold” and where inflation gradually moderates to more target-friendly levels. But while that view may have appeared overly optimistic a few weeks ago, much of the incoming data more recently appears to support this narrative. In our charts this week we focus on:

·       Upbeat GDP data for Q2

·       The messaging from August’s sentix surveys

·       Ebbing US unit labour cost pressures

·       Target-friendly inflation outcomes

·       Inflation expectations and oil prices

·       China’s soggy imports and PPI deflation