Economy slows

The much-anticipated slowing of the US economy has arrived. From Reuters:

Gross domestic product grew at a 2.5 percent annual rate in the April-June quarter, well below Wall Street analysts' forecasts for 3 percent and less than half the robust 5.6 percent rate registered in the first quarter...

Not only was there a decrease in consumer spending on costly durables like cars, but export growth slowed, government spending was weaker and housing investment turned down.

However, inflation pressures have not receded.

At the same time, an inflation gauge favored by the Federal Reserve -- a measure of personal consumption expenditure prices minus food and energy -- jumped at a 2.9 percent rate in the second quarter, well ahead of the first quarter's 2.1 percent.

It was the fastest rate of increase for the gauge of so-called core inflation in nearly a dozen years, since the third quarter of 1994 when it jumped at a 3.2 percent rate...

Separately, the Labor Department reported its Employment Cost Index, which covers wages, salaries and benefits, climbed by a bigger-than-expected 0.9 percent in the second quarter. That was the largest increase since the first quarter of 2005, a potential warning sign on inflation.

Meanwhile, consumer sentiment held up in July.

Another report on Friday showed consumers remained hopeful about their prospects. The University of Michigan's final reading on consumer sentiment rose to 84.7 in July from an initial reading of 83.0, only modestly lower than June's 84.9 reading.

While the US economy slows, the data from the euro zone also suggest some potential slowing, as M3 grew 8.5 percent percent year-on-year in June, down from 8.8 percent in May and less than expected. M1 and private sector loan growth also slowed.

Meanwhile, the Japanese economy is still "crawling out of deflation". From Reuters:

The nationwide core consumer price index (CPI), which excludes fresh food, rose 0.6 percent in June from a year earlier, matching market expectations...

Core CPI in the Tokyo area for July, announced a month before the nationwide figures, was up 0.4 percent from a year earlier, also matching forecasts...

Separate data showed retail sales in June rose 0.4 percent from a year earlier. Compared with May, retail sales rose 0.1 percent on a seasonally adjusted basis.

The seasonally adjusted unemployment rate rose to 4.2 percent in June from 4.0 percent in May and higher than a market consensus forecast of 4.0 percent...

The jobs-to-applicants ratio for June rose to 1.08 from 1.07 in May, meaning 108 jobs were available per 100 applicants. The last time the figure was 1.08 was in July 1992...

Overall household spending in Japan fell 2.2 percent in June from a year earlier in price-adjusted real terms, falling more than a median market forecast of a 1.7 percent decline.