Initial MNI analysis of the GDP and.........>

US DATA: Initial MNI analysis of the GDP and Employment Cost Index data released

today brought further evidence of mounting price pressures and more ammunition

for US monetary policy hawks. Some highlights:

- The ongoing sequential rise in real GDP Y/Y (which has improved in each

quarter since Q216) is consistent with a steady rise in core CPI Y/Y through

Q319, as price pressures tend to follow real growth with a lag.

- The Employment Cost Index Wages and Salaries print for private sector workers

of +1.0% Q/Q was easily the highest of the cycle and the highest since Q103.

- While the headline GDP deflator reading of 2.0% Q/Q ann. was below

expectations of 2.4%, core PCE prices rose 2.5%, the strongest since Q211. The

residential investment price deflator rose by 8.5% Q/Q ann. with overall fixed

inv. prices up 2.9%, Q/Q ann., each of which was the second-highest since 2006. 

- MNI PINCH showed little post-data change in the market fully pricing in two

more 25bps hikes by the end of 2018, but inflation expectations have mounted

this week, with the 5Y5Y inflation swap forward hitting a 3.5-yr high of 2.28%.