While the GDP print came in stronger than expected, despite a sharp drop in consumption, the big news in today's data had nothing to do with GDP and everything to do with employment costs, and wages and salaries in particular, which both rose at the fastest pace in nearly a ten years, confirming that inflationary wage pressures are growing.

Specifically, wages and salaries rose 0.9%QoQ, up from 0.6% in the previous quarter. Total compensation, which includes wages and benefits, rose 2.7% over past 12 months, up from 2.4% a year ago, while private-sector wages and salaries advanced 2.9%YoY, also above the 2.6% printed in Q1 2017. Both were the strongest prints since Q3 2008, if slightly below the 3% pace observed heading into the financial crisis as shown below.

In kneejerk response the dollar spiked higher, although it has since faded much of the move, although more ominously, the 2s10s flattened once again, and is back to 48 bps, just shy of fresh post-crisis lows.