Last week’s economic data continued to illustrate the uneven state of US economic recovery. On one hand, industrial production grew in July, and job opening increased last week. On the other hand, retail sales failed to pick up in July, initial jobless claims rebounded, producer price inflation (PPI) slowed to weak 0.1%, and consumer expectation reading dropped to the lowest since the government shutdown of October. Although there is some discussion about earlier rate hike, the fragile economic condition may still keep the Fed on a cautious approach in tightening policy. 

Global economic data seem to suggest that economic activity may be falling apart. Real GDP in Japan shrunk at 6.8% annualized rate in Q2, although it is mainly due to the transitory effects of consumer tax hike. What is more worrisome is the stagnation of Eurozone economy. With CPI inflation barely above zero, the weakness in GDP growth might send the economy into a deflationary state.