Personal consumption delivered a healthy 2.3% growth rate. We also got the quarterly core PCE deflator figures for the second quarter. These were less helpful, and showed core PCE inflation of 2.9%, more than the 2.7% expected. We have backed out what this means for today’s June PCE on the assumption that there are no historical revisions (which there probably will be) and that points to a core PCE inflation rate of 2.7% off a 0.3% MoM increase. Just to be clear, revisions to past data mean that this is not a guaranteed outcome. Consumer confidence figures form The University of Michigan are also published today. Yesterday, we also had Germany’s Ifo survey. This disappointed and resumed its decline. Carsten Brzeski analyses what this means for the sick-man of Europe.

Singapore: The MAS monetary policy statement came out at 0800. As expected, there were no changes to the SGD NEER slope, centre or bandwidth. Later on, we get June industrial production data, which is expected to show continued weakness, in line with the soggy export figures.

Japan: Tokyo consumer price data showed that headline inflation edged down to 2.2% YoY in July (vs 2.3% in June, market consensus), but the BoJ’s preferred measure, core inflation excluding fresh food, rose to 2.2% in July (vs 2.1% in June, 2.2% market consensus). Utilities jumped to 12.6% y/y in July (vs 6.2% in June, 4.7% in May, -3.0% in April). Utilities have been the main driver of the acceleration in core inflation over the past three months. On a monthly comparison, inflation rose 0.1% MoM sa, its third consecutive increase. This month’s rise was mainly from goods prices (0.3%) while service prices stayed flat.

Given yesterday’s stronger-than-expected PPI services data, 3.0% YoY in June (vs revised 2.7% in May, 2.6% market consensus), we believe that inflationary pressure in services continues to build. It is a close call, but we maintain our view that the BoJ will hike rates by 15 bp and reduce its bond-buying programme at the same time. Markets will also be watching closely for the Bank of Japan’s plans to taper its government bond purchases and the pace and scale of those purchases. The market consensus is for the BoJ to start with a cut to 5 trillion JPY and move down to 3 trillion JPY over the next two years.