The big news yesterday was, of course, the Fed pause. You can read the FOMC statement as well as some good analyses by econ bloggers Mark Thoma, James Hamilton and William Polley.
Despite the pause, the Fed still said that "some inflation risks remain" and that "additional firming...may be needed to address these risks". Data on productivity and unit labor costs released yesterday could have influenced the Fed to keep these statements. From Reuters:
The Labor Department said unit labor costs -- a key gauge of profit and price pressures -- rose at a 4.2 percent annual pace, their fastest jump since the fourth quarter of 2004... The Labor Department revised the first quarter pace sharply upward to 2.5 percent.
Nonfarm business productivity rose at a 1.1 percent annual pace in the second quarter, slowing considerably from the 4.3 percent pace in the first quarter, a rate that was revised upward from the previously reported increase of 3.7 percent.
There were also reports of continued growth in retail sales.
In the retail sector, a report from Redbook Research on Tuesday showed that U.S. chain store sales rose in the first week of August, helped by back-to-school tax holidays in some states and summer clearance sales. Sales at major retailers were up 3.2 percent on a year-over-year basis in the week ended August 5, following a 2.8 percent rise the week before.
U.S. July retail sales data released by SpendingPulse, excluding autos, rose a seasonally adjusted 0.4 percent to $286.0 billion, after a 0.4 percent increase in June.
Retail sales also picked up pace in the UK in July, with the British Retail Consortium reporting that like-for-like retail sales grew 3.4 percent on year earlier compared with 2.3 percent annual growth in June. Adding to the positive news from the UK was a report that recruitment agencies placed staff in permanent jobs at the fastest rate in more than two years in July.
Less positive was the news on industrial production in Europe. German industrial production fell 0.4 percent in June compared to a 1.5 percent increase in May while Italian industrial production growth slowed to 0.1 percent in June compared to 0.9 percent in May.
Meanwhile, Japan's economy continues on its recovery path, with the Bank of Japan reporting yesterday that bank lending rose 2.2 percent in July, the fastest pace in 10 years. This was despite money supply growing just 0.5 percent, the slowest since April 1993.