US Macro Updates

The One Stop Portal for US Macroeconomic Data. Simplified and Summarized! 

We simplify and summarize key data so that you don’t have to spend hours reading confusing and long media releases. Read key economic releases and major events here in under 2 minutes. And we will explain the key takeaway for you. Stay informed and form a robust view on macroeconomic matters to aid your successful investment decisions

Personal Income and Outlays / PCE Price Index

30th Jul 2026 NEW

Key takeaway: The Personal Consumption Expenditures Price Index is the Federal Reserve’s preferred measure of inflation because it captures a broader range of consumer spending than the Consumer Price Index, adjusts for substitution effects as consumers shift between goods, and covers a wider population including employer-provided healthcare. Headline PCE reflects overall price changes across all goods and services, while core PCE strips out volatile food and energy components to give policymakers a clearer read on underlying inflation trends. Over the past two years, both measures have gradually retreated from their 2022 peaks, though the path back to the Fed’s 2% target has been slow and uneven, with core PCE proving persistently sticky throughout much of 2024 and into 2025. The June 2026 data present a somewhat mixed picture, with headline PCE edging down 0.11% on the month, suggesting energy or food price relief is providing near-term disinflationary pressure. Core PCE, however, ticked up 0.13%, a modest but notable move that signals underlying price pressures have not fully dissipated. For the Fed, a mild monthly rise in core PCE is unlikely to trigger alarm on its own, but it does reinforce a cautious stance and reduces urgency around near-term rate cuts or hikes. Markets will be watching whether this uptick in core represents a one-month blip or the beginning of a renewed stalling in the disinflation trend.

PCE Price Index decreased 0.11% in Jun to 131.39.
Core PCE Price Index increased 0.13% in Jun to 130.27.

28th Jun 2026 NEW

Key takeaway: The Personal Consumption Expenditures Price Index is the Federal Reserve’s preferred measure of inflation because it captures a broader range of consumer spending than the CPI, adjusts for substitution effects as consumers shift their purchasing habits, and reflects actual expenditures rather than a fixed basket of goods. Headline PCE includes all categories of consumer spending, while Core PCE strips out volatile food and energy prices to give policymakers a clearer view of underlying inflation trends. Over the past one to two years, both headline and core PCE have gradually declined from their post-pandemic peaks, reflecting the cumulative impact of the Fed’s aggressive rate-hiking cycle, though progress toward the 2% annual target has remained slow and uneven. May’s headline reading of 0.45% month-over-month suggests that energy or food prices may have exerted upward pressure on the broader index, while the softer core reading of 0.32% indicates that underlying price pressures, though still present, are more contained. On an annualized basis, a monthly core reading of 0.32% remains above the pace consistent with the Fed’s 2% inflation target, keeping the central bank in a cautious stance. This data is unlikely to prompt an immediate rate cut, as the Fed will want to see a sustained string of lower monthly readings before gaining the confidence needed to ease policy. Interest rate markets are likely to temper near-term expectations for cuts following this release, with the Fed remaining data-dependent heading into the second half of 2026. On the income front, the trend remains upward and healthy as it has been in recent years. Headline personal income grew 0.7% in May, although the number was inflated by an increase in farm proprietors income due to an increase from the payments from The American Relief Act of 2025. Both nominal and real consumption remained healthy and steady.

PCE Price Index increased 0.45% in May to 131.53.
Core PCE Price Index increased 0.32% in May to 130.08.

28th May 2026 NEW

Key takeaway: The Personal Consumption Expenditures Price Index is the Federal Reserve’s preferred measure of inflation because it captures a broader range of spending than the Consumer Price Index, adjusts for changes in consumer behavior over time, and uses a methodology that the Fed believes more accurately reflects real-world price pressures facing households. Headline PCE tracks price changes across all goods and services, while Core PCE strips out volatile food and energy components to give policymakers a clearer read on underlying inflation trends. Over the past two years, both measures had been on a gradual downward trajectory from their post-pandemic peaks, though progress toward the Fed’s 2% annual target has remained uneven and at times frustratingly slow. The April 2026 headline PCE reading of 0.40% month-over-month suggests a notable pickup in price pressures, likely reflecting in part the pass-through effects of tariff-related cost increases feeding into consumer prices. Core PCE rising 0.24% month-over-month is somewhat more reassuring, as it remains more moderate, but it still runs above the pace consistent with a swift return to target on an annualized basis. Together, these figures are unlikely to provide the Federal Reserve with the confidence it has indicated it needs before moving to cut interest rates. Markets and analysts will be watching subsequent releases closely to determine whether April’s acceleration represents a temporary tariff-driven spike or the beginning of a more persistent re-acceleration in inflation.

PCE Price Index increased 0.40% in Apr to 130.9.
Core PCE Price Index increased 0.24% in Apr to 129.63.

PCE Price Index – April 2026: +0.40% (130.90)
Core PCE Price Index – April 2026: +0.24% (129.63)

30th Apr 2026 NEW

Key takeaway: The Personal Consumption Expenditures Price Index is the Federal Reserve’s preferred measure of inflation because it captures a broader range of consumer spending than the Consumer Price Index, adjusts for substitution effects as consumers shift spending habits, and covers a wider population including rural households and employer-provided healthcare. Headline PCE reflects overall price changes across all goods and services, while core PCE strips out volatile food and energy components to give policymakers a clearer read on underlying inflation trends. Over the past 12 to 24 months, both headline and core PCE had been on a gradual disinflationary path following the elevated readings of 2022 and early 2023, though progress toward the Fed’s 2% annual target has remained uneven. The March 2026 headline PCE reading of 0.66% month-over-month is notably elevated and suggests a potential reacceleration in overall price pressures, possibly reflecting energy or food price volatility, tariff-related cost pass-through, or broader demand-side dynamics. Core PCE’s more moderate 0.29% monthly gain is somewhat closer to a pace consistent with the Fed’s target, but still runs slightly above the roughly 0.17% monthly rate needed to achieve 2% annualised inflation. Together, these figures are likely to reinforce a cautious stance from the Federal Open Market Committee, reducing the near-term probability of rate cuts and keeping the door open for rates to remain higher for longer. Markets and policymakers will be watching whether the headline spike proves transitory or signals a more persistent uptick in inflationary momentum.

PCE Price Index increased 0.66% in Mar to 130.34.
Core PCE Price Index increased 0.29% in Mar to 129.28.

PCE Price Index – March 2026: +0.66% (130.34)
Core PCE Price Index – March 2026: +0.29% (129.28)

9th Apr 2026

Key takeaway: The BEA’s Personal Income and Outlays report for February 2026, released on April 9, covered the Fed’s preferred inflation gauge alongside a mixed picture on income and spending. The headline PCE price index rose 2.8% year-on-year — unchanged from January — while core PCE (excluding food and energy), the Fed’s primary inflation benchmark, came in at 3.0% year-on-year, down slightly from 3.1% the prior month, with both measures in line with market expectations. On a monthly basis, headline PCE rose 0.4% month-on-month, up from 0.3% in January, while core PCE also rose 0.4%. The income and spending data told a more cautious story: personal income fell $18.2 billion, or 0.1%, in February — largely reflecting decreases in personal dividend income and transfer receipts — while disposable personal income also slipped 0.1%. Despite the income dip, consumer spending rose $103.2 billion, or 0.5%, with the personal saving rate edging up to 4.0%. For the Fed, the February PCE data reinforces the “higher for longer” narrative — core inflation remains a full percentage point above the 2% target, and with the March CPI already flagging a sharp energy-driven spike, policymakers have little room to ease. The March PCE release, which will capture the full force of the Iran war energy shock, is due at the end of April and will be a critical data point for the Fed’s next policy assessment.  

13th Mar 2026

Key takeaway: (Delayed release due to govt shutdown) – Data released by the U.S. Bureau of Economic Analysis showed that personal income increased by 0.4% in January, following a similar increase in the previous month. Meanwhile, disposable personal income increased by 0.9% during the month, reflecting both higher income and lower personal current taxes. Personal consumption expenditures increased by 0.4% in January, representing an increase of $81.1 billion, with spending on services rising by $105.7 billion, partly offset by a $24.6 billion decline in spending on goods. Within the report, the PCE price index increased by 0.3% during the month and was 2.8% higher than a year earlier, while the core PCE price index, which excludes food and energy, increased by 0.4% during the month and 3.1% compared with a year earlier. After scaling down from its peak in 2022, inflation has mostly been stuck around the 2.5% to 3.0% range over the past 2 years. Both CPI and PCE Price indexes have remained stubbornly above the Fed’s 2% target level for 5 years now. The wedge between Core PCE and Core CPI has started increasing now due to the fact that Shelter, which is disinflating, comprises a larger portion of the Core CPI than in Core PCE. Consumer spending in the US economy remains strong as it has been for the past 4-5 years.  

20th Feb 2026

Key takeaway: (Delayed release due to govt shutdown) – After scaling down from its peak in 2022, inflation has mostly been stuck around the 2.5% to 3.0% range over the past 2 years. Both CPI and PCE Price indexes have remained stubbornly above the Fed’s 2% target level for 5 years now. The latest release provides Income and Consumption expenditures data for December. The release showed the headline PCE index rose 0.4% in December and stood 2.9% higher on a y-o-y basis. Core PCE also came in at 0.4% m-o-m and stood at 3.0% y-o-y. Broadly there isnt much improvement in the headline and core price indexes and inflation remains stuck in the 2.5% – 3.0% range. Consumer spending in the US economy remains strong as it has been for the past 4-5 years. Nominal consumer spending rose a decent 0.4% in Decemberh. Nominal consumer spending has been rising at approx. 5% on an annual basis for the past 2 years. Given inflation has been in a 2.5% to 3.0% range, real personal consumption expenditures have been growing at about 2.5%-3.0% for the past 2 years. The strength in nominal consumption can also be seen in the retail sales data from the Census Bureau. On the other hand, while Personal income has also generally printed strong numbers through the year, the trend has been slightly lower over the past 12-24 months. Personal Income increased a healthy 0.3% in December. However, personal income y-o-y growth has gradually come down from around 7% in 2023 to around 4.5% now. This level is mostly similar to the level of personal income growth pre-2020. However, because inflation is higher than pre-covid levels, real disposable personal income growth is lower than pre-covid levels. This has yet to translate into weaker consumer spending as the consumer continues to increase leverage and keep up current consumption patters.   

22nd Jan 2026

Key takeaway: (Delayed release due to govt shutdown) – After scaling down from its peak in 2022, inflation has mostly been stuck around the 2.5% to 3.0% range over the past 2 years. Both CPI and PCE Price indexes have remained stubbornly above the Fed’s 2% target level for 5 years now. The delayed release provides Income and Consumption expenditures data for both months of October and November. The release showed the headline PCE index rose 0.2% in each month. The Index stood 2.8% higher con a y-o-y basis in November. Core PCE also came in at 2.8%. Broadly there isnt much improvement in the headline and core price indexes and inflation remains stuck in the 2.5% – 3.0% range. Consumer spending in the US economy remains strong as it has been for the past 4-5 years. Nominal consumer spending rose a decent 0.5% in each month. Nominal consumer spending has been rising at approx. 5% on an annual basis for the past 2 years. Given inflation has been in a 2.5% to 3.0% range, real personal consumption expenditures have been growing at about 2.5%-3.0% for the past 2 years. The strength in nominal consumption can also be seen in the retail sales data from the Census Bureau. On the other hand, while Personal income has also generally printed strong numbers through the year, the trend has been slightly lower over the past 12-24 months. Personal Income increased a healthy 0.3% in November and 0.1% in October. However, personal income y-o-y growth has gradually come down from around 7% in 2023 to around 4.5% now. This level is mostly similar to the level of personal income growth pre 2020. However, because inflation is higher than pre-covid levels, real disposable personal income growth is lower than pre-covid levels. This has yet to translate into weaker consumer spending as the consumer continues to increase leverage and keep up current consumption patters.   

5th Dec 2025

Key takeaway: (Delayed release due to govt shutdown) – After scaling down from its peak in 2022, inflation has mostly been stuck around the 2.5% to 3.0% range over the past 2 years. Both CPI and PCE Price indexes have remained stubbornly above the Fed’s 2% target level for 5 years now. The delayed release of Income and Consumption expenditures showed the headline PCE index rose 2.8% in September, slightly higher than the 2.7% in August. Core PCE also came in at 2.8%, slightly lower than the 2.9% seen in August. Both prints were mostly in line with expectations and do little to change the likelihood of a December rate cut, that markets have mostly fully priced in. Consumer spending in the US economy remains strong as it has been for the past 4-5 years. Nominal consumer spending rose a decent 0.3% m-o-m. Nominal consumer spending has been rising at approx. 5% on an annual basis for the past 2 years. However, Real spending, adjusted for inflation, was flat at 0% m-o-m. Similarly, on an annual basis, real personal consumption expenditures have been growing at about 2.5%-3.0% for the past 2 years, given that inflation has been stuck in the 2.5% to 3.0% range. The strength in nominal consumption can also be seen in the retail sales data from the Census Bureau. Personal income has also generally printed strong numbers through the year. Personal Income increased a healthy 0.4% in September. Compensation of employees increased by 0.4%.  

26th Sep 2025

Key takeaway: Inflation was mostly on a downward trajectory from its peak in 2022 to 2023/24. However, the downward trend stalled in the past couple of years and inflation has been stubbornly anchored above the 2% target level of the Fed. In fact, both the CPI and the PCE Price Index have been on an upward trajectory over the past few months. The latest PCE report for August had headline PCE increasing slightly from 2.6% to 2.7%, while Core PCE remained unchanged at 2.9%. Services inflation was once again the driver behind the advance in PCE inflation, while goods inflation remained relatively modest. The most notable features of the economy remains the robust consumer spending. Nominal consumer spending rose a strong 0.6%. Real spending, adjusted for inflation, also rose a healthy 0.4%. Retail sales data in recent months have also indicated ongoing strong consumption trends in the economy. With the exception of a sharp fall in January, real personal expenditures have posted mostly positive prints through 2025. Personal income has also generally printed strong numbers through the year. Personal Income increased a healthy 0.4% in August. Compensation of employees increased by 0.3%.  

31st Jul 2025

Key takeaway: Inflation has mostly come in lower than market expectations through most of this year. This has led to louder calls for the Fed to cut interest rates sooner than later. Although the Fed chose to keep rated unchanged this week at the FOMC meeting, 2 Governors dissented, voting for a rate cut – a first since 1993. Their argument has mostly been centered around early signs of weakness in the job market (based on a weak ADP and NFP jobs number in June). On the other hand, Chair Powell is of the view that the unemployment rate would be the primary yardstick to measure weakness in the employment. It would be incorrect to view total jobs created each month as the primary yardstick since immigration has reduced the total quantum of labor supply. And even at approx. 100K jobs a month, the economy would be close to full employment. His view has also been that it is too early to presume there aren’t any inflationary effects from the tariffs. The latest PCE report provide the Chair with some more ammunition to substantial his view. Headline PCE increased from 2.4% in May to 2.6% in June. Core PCE was mostly unchanged at 2.8%, but similar to headline PCE, the print came in above consensus expectations. Inflation, though much lower from the peak, is still above the Fed’s target level. Also, the latest report showed core goods inflation accelerating once again. Personal income has also generally printed strong numbers through the year. Personal Income increased 0.3% compared to expectations of an increase of 0.2%. Compensation of employees increased a decent 0.2%. Personal expenditures in nominal terms also increased 0.3% and in real terms also increased 0.1%.  

27th Jun 2025

Key takeaway: The excitement post the November election had led the equity market to rise and bond yields had increased to levels last seen towards the end of 2023. However, the tariff related announcements in early April caused significant drawdowns in equity markets, led bond prices to fall and caused some depreciation in the dollar. Businesses became uncertain about the future and hence focus gradually shifted to the employment side of the Fed’s mandate. However, since then equity markets have rallied back as some of the tariff announcements were rolled back or at least paused for the time being. Notwithstanding the rise in equity markets, inflation has still printed mostly lower in the past few months post the hot prints at the start of the year. The latest PCE report further confirms the ongoing deceleration in inflation. Headline PCE increased slightly from 2.2% in April to 2.3% in May. Similarly, Core PCE also increased marginally from 2.6% to 2.7%. While they remain higher than the Fed’s target levels, they are close enough to the level and the Fed will draw comfort from that. Economists and market participants are wary of tariffs causing a surge in inflation. However, that has not transpired yet. PMI surveys however, have been indicating a pick up in input prices which will continue to pressure downstream inflation. Dollar depreciation also adds to inflationary pressures. Markets hence continue to be uncertain whether the inflation mandate or the employment mandate will be prioritized by the Fed in the coming months. It is key to note though that the June Fed meeting has mostly been hawkish with Powell talking down any immediate rate cuts. Personal income has also generally printed strong numbers through the year. However, Personal Income declined for the first time in recent history decreasing 0.4% compared to expectations of an increase of 0.3%. While compensation of employees driven by wages and salaries increased a strong 0.4%, personal current transfer receipts declined a solid 2.2%, led by reductions in social security. Personal expenditures in nominal terms also decreased 0.1% and in real terms also decreased 0.3%. This probably is the most noteworthy point in the latest data release. 1st quarter GDP has also been revised lower based on a lower revised consumption print. It is also worth remembering that Real PCE had declined 0.6% in January. That was really the starting point for the market developing significant concerns around the economy and the Atlanta Fed GDP Nowcast forecasting a minus 1.5% GDP growth in 1Q 2025.  

30th May 2025

Key takeaway: The excitement post the November election had let to the equity market rising as well as bond yields increasing to levels last seen towards the end of 2023. However, the tariff related announcements in early April caused significant drawdowns in equity markets, led bond prices to fall and caused some depreciation in the dollar. Businesses became uncertain about the future and hence focus gradually shifted to the employment side of the Fed’s mandate. However, since then equity markets have rallied back as some of the tariff announcements were rolled back or at least paused for the time being. Notwithstanding the rise in equity markets, inflation has still printed mostly lower in the past couple of months post the hot prints at the start of the year. The latest PCE report showed headline PCE and Core PCE both declining. Headline PCE declined from 2.3% to 2.1%. Core PCE declined from 2.7% to 2.5%. While they remain higher than the Fed’s target levels, they are close enough to the level and the Fed will draw comfort from that. However, PMI surveys have been indicating a pick up in input prices which will continue to pressure downstream inflation. Dollar depreciation also adds to inflationary pressures. Markets are hence uncertain whether the inflation mandate or the employment mandate will be prioritized by the Fed in the coming months. Personal income has also generally printed strong numbers through the year. Personal Income increased 0.8% compared to expectations of 0.3%. Compensation of employees driven by wages and salaries increased a strong 0.5%. Personal expenditures in nominal terms increased 0.2% and in real terms also increased 0.1%. While this is a soft number, it comes on the back of a couple of months of strong expenditure prints. It is also worth remembering that Real PCE declined 0.6% in January. That was really the starting point for the market developing significant concerns around the economy and the Atlanta Fed GDP Nowcast forecasting a minus 1.5% GDP growth in 1Q 2025.  

30th Apr 2025

Key takeaway: Since the start of the year, inflation had been center stage on everyone’s mind. We had seen a couple of hot CPI and PPI prints earlier in the year. The excitement post the November election had let to the equity market rising as well as bond yields increasing to levels last seen towards the end of 2023. However, since Liberation day, focus has been gradually shifting to the employment side of the Fed’s mandate. The latest PCE report showed headline PCE and Core PCE both declining. Headline PCE declined from 2.7% to 2.3%. Core PCE declined from 3.0% to 2.6%. Nonetheless, they remain too high for the Fed’s comfort. Markets are hence uncertain whether the inflation mandate or the employment mandate will be prioritized by the Fed in the coming months. The latest report also comes on the same day as 1Q 2025 GDP data which basically showed the GDP Price deflator increased substantially in the first quarter. Personal income has also generally printed strong numbers through the year. although most of the increase is on account of personal transfer receipts. Personal Income increased 0.5% compared to expectations of 0.4%. Compensation of employees driven by wages and salaries increased a strong 0.5%. Personal expenditures in nominal terms increased 0.7% and in real terms also increased 0.7%. That is quite a strong number. This also ties in with the fact that personal consumption held quite well in the 1Q GDP data as well. It is worth remembering that Real PCE declined 0.6% in January. That was really the starting point for the market developing significant concerns around the economy and the Atlanta Fed GDP Nowcast forecasting a minus 1.5% GDP growth in 1Q 2025.  

28th Mar 2025

Key takeaway: The story so far. Inflation had been mostly soft in 2H 2024. Most participants were expecting a continued disinflationary trend in 2025. However, the January CPI release surprised everyone with a significantly higher print. That was followed by a hotter than expected PPI print. Based on the 2 inflation data points, markets were expecting PCE Price Index to decline slightly from 2.6% in December to 2.5% in January. That is exactly what the January release showed. Core PCE in January also declined from 2.9% to 2.6%, in line with market expectations. Since then, the February CPI had been softer than expected. Based on softer CPI release, consensus expectations were for PCE and Core PCE to remain stable at 2.5% and 2.7% in February. Instead while headline PCE for February came in at 2.5%, Core PCE came in slightly hotter than expected at 2.8%. While the reading wasn’t exceptionally hot, it does continue to constrain the Fed in its rate cutting cycle. Treasury yields fell today, though it seemed to be more in response to the significant uncertainties caused by additional tariff threats today. Personal Income once again rose sharply by 0.8%. That is significantly higher than the 0.3%-0.5% we have seen in most of the past 2 years. Personal income has printed hot for 2 consecutive months in 2025, although most of the increase is on account of personal transfer receipts. Compensation of employees driven by wages and salaries increased only 0.5% – though that is higher than most monthly prints in the past year. Personal expenditures in nominal terms increase 0.4% and in real terms increased 0.1%. It is worth remembering that Real PCE declined 0.6% in January. That was really the starting point for the market developing significant concerns around the economy and the Atlanta Fed GDP Nowcast forecasting a minus 1.5% GDP growth in 1Q 2025.  

28th Feb 2025

 

Key takeaway: The story so far. Inflation had been mostly soft in 2H 2024. Most participants were expecting a continued disinflationary trend in 2025. However, the January CPI release surprised everyone with a significantly higher print. That was followed by a hotter than expected PPI print. Based on the 2 inflation data points, markets were expecting PCE Price Index to decline slightly from 2.6% in December to 2.5% in January. That is exactly what the release showed. Core PCE also declined from 2.9% to 2.6%, in line with market expectations. Even though the inflation numbers in the latest data release came just as expected, markets were significantly shaken by some of the other data points in this release. Firstly, Personal Income rose a massive 0.9%. That is significantly higher than the 0.3%-0.5% we have seen in most of the past 2 years. However, compensation of employees driven by wages and salaries increased only 0.4% – mostly similar to recent past prints. However some other measures of income like Personal dividend income and Government social benefits showed a massive increase. Secondly, as perhaps more importantly, the latest data release showed a substantial drop in personal expenditures (minus 0.2%). While the drop is not large in magnitude, this is the first m-o-m negative print since March 2023.  That was sufficient to set the cat amongst the pigeons. Treasury yields fell sharply in response. The Atlanta Fed GDP Nowcast is now forecasting a minus 1.5% GDP growth in 1Q 2025. A combination of large increase in personal income and a fall in personal expenditure caused the savings rate to rise to 4.6% from 3.5%! 

31st Jan 2025

Key takeaway: US PCE data for the month of December came in largely in line with expectations and hence was mostly a non-event. In any case, there are more pressing and important issues that markets are concerned about these days including Deep Seek and Trump tariffs. Headline PCE inflation printed at 2.6%, up from 2.4% in November. Headline PCE has now risen for 3 months in a row from a low of 2.1% in September. Core PCE printed at 2.8%, unchanged from the previous month of November. Although Core PCE has also accelerated from the low of 2.6% a few months back. The Fed has now indicated only 2 rate cuts in 2025 and markets are occasionally pricing in even lesser than 2 cuts this year. A resilient economy and the large fiscal deficits continue to pressure treasury yields upwards though recent market volatility and uncertainty are also pulling them downwards in the opposite direction. Personal Income also increased a decent 0.4% m-o-m in December and Disposable Personal Income also increased 0.4%. Consumption still remains solid in the US. Nominal personal spending rose 0.7% and real personal spending rose a healthy 0.4%. 

20th Dec 2024

Key takeaway: After a hotter-than-expected reading last month, the latest PCE Price Index for November came in softer and below expectations. Headline PCE inflation printed at 2.4%, up from 2.3% in October. Similarly, Core PCE printed at 2.8%, unchanged from the previous month of October. Even though the prints were softer than expected, treasuries continued their slide down and yields continue to rise. The Fed has now indicated only 2 rate cuts in 2025. A resilient economy and the large fiscal deficits continue to pressure yields upwards. Personal Income also increased a decent 0.3% m-o-m in November and Disposable Personal Income also increased 0.3%, both slightly softer than expectations and also lower than recent months. Consumption still remains solid in the US and increasing wages will keep up the pressure on prices.  

27th Nov 2024

Key takeaway: The latest PCE Price Index for October showed a mild re-acceleration in inflation. Headline PCE inflation printed at 2.3%, up from 2.1% in September. Similarly, Core PCE printed at 2.8%, up from 2.7% in September. The prints though were mostly in line with expectations. The slight uptick in inflation caused a bit of a pull back in treasuries. But at the same time, the Fed funds futures market also indicated a slightly higher probability of a rate cut in December. On the balance, the latest release did not move markets significantly. The key point to note in the release was that Personal Income increased a solid 0.6% m-o-m in October and Disposable Personal Income increased 0.7%, both significantly higher than recent months. Consumption still remains solid in the US and increasing wages will keep up the pressure on prices.  

31st Oct 2024

Key takeaway: Inflation, both from a CPI and PCE Price Index perspective, has been on a declining trend. After piping hot inflation prints in the first few months of the year, inflation prints had been mostly soft during the middle of the year. The latest PCE Price Index for September showed a mild re-acceleration in inflation. CPI for the month of October had also come in slightly higher than expected. Similarly, we saw a blowout jobs number for September. Finally, 3Q GDP is seen to have growth at 2.8% with the consumer spending portion having grown at over 3%. Retail Sales data also continues to be strong. These string of positive data points have reinvigorated the notion of a soft landing or even that of a no landing scenario. 10 year note yields have also risen sharply in response. Headline PCE inflation printed at 2.1%, down from 2.3% in August. Core PCE, on the other hand, printed at 2.7%. This was slightly higher than consensus expectations. Core PCE increased 0.3% on a m-o-m basis, which was the highest since April earlier in the year. Wages and salaries increased at a healthy 0.5% for the second month in a row. The personal savings rate continues to be relatively low and declining at 4.6%. Real PCE increased a strong 0.4%. Consumption continues to remains quite resilient. 

27th Sep 2024

Key takeaway: After piping hot inflation prints in the first few months of the year, inflation prints have been very soft for the past 5 months. The latest PCE Price Index for August continues that trend of inflation surprising lower and bolstering more 50 bps rate cut expectations. Headline PCE inflation printed at 2.2%, down from 2.7% in March earlier in the year. The headline number was also lower than consensus expectations of 2.3%. Core PCE, on the other hand, was slightly higher at 2.7% compared to 2.6% previous month. The Core Index has been around this mark for most of 2024. Nonetheless, in summary, rate cut expectations are getting further solidified with the headline index steadily marching down. Personal Income growth was also relatively soft of 0.2% m-o-m, although wages and salaries increased at a healthy 0.5%. The personal savings rate continues to be relatively low at 4.8% though steadily higher from the low of 2.0% in June 2022. Real PCE increased a muted 0.1%. Consumption though still remains quite resilient and that was evidenced in a strong Q2 GDP number as well as resilient retail sales numbers in the past few months. 

30th Aug 2024

Key takeaway: After piping hot inflation prints in the first few months of the year, Q2 has been a relatively modest period for inflation. The PCE prints for April, May and June had been relatively benign. July was also not an exception. The latest release of PCE data shows the PCE Price Index for July was at 2.5% y-o-y, the same as the previous month of June. The monthly print was also relatively mild at 0.2%. Core PCE printed at 2.6% y-o-y and 0.2% m-o-m, once again at the same levels as the previous month of June and in line with consensus expectations. With 4 months of soft inflation prints, the stage is set for the first rate cut in September. Whether the rate cut is of 25 basis points or 50 depends on the August CPI to be release mid September. Real PCE increased a robust 0.4%. Consumption still remains quite resilient and that was evidenced in a strong Q2 GDP number as well as resilient retail sales numbers. Lastly, personal income continued to rise at 0.3% rate in the month of July primarily driven by wages. Given the continued robust spending, the savings rate continues to remain low at 2.9%. 

26th Jul 2024

Key takeaway: After piping hot inflation prints in the first few months of the year, Q2 has been a relatively modest period for inflation. The PCE print for both April and May had been relatively benign. June was not an exception. The latest release of PCE data shows the PCE Price Index for June was at 2.5% y-o-y, slightly lower than the previous month of May. The monthly print was also mild at 0.1%. Core PCE printed at 2.6% y-o-y and 0.2% m-o-m, mostly in line with consensus expectations. With 3 months of soft inflation prints, the stage is set for the first rate cut – most likely in September. Real PCE increased 0.2%. Consumption still remains quite resilient and that was evidenced in a strong Q2 GDP number as well. Lastly, personal income continued to rise at 0.2% rate in the month of June primarily driven by wages. Given the continued robust spending, the savings rate continues to remain low at 3.4%. 

28th Jun 2024

Key takeaway: After piping hot inflation prints in the first few months of the year, Q2 has been a relatively modest period for inflation. The PCE print for April had come in softer than expected. The latest release of PCE data shows inflation was benign in the month of May too. The PCE Price Index for May was at 2.6% y-o-y, slightly lower than the previous month of March. The monthly print was unchanged at 0.0%. Core PCE printed at 2.6% y-o-y and 0.1% m-o-m. Even though the inflation numbers were soft overall, they were mostly in line with expectations and did not surprise to the downside. The other key point to note was that, unlike the previous month of April, real personal consumption expenditures did not register a negative print. Real PCE increased 0.3%. Lastly, personal income continued to rise at a healthy 0.5% rate in the month of May primarily driven by wages and personal income receipts. Given the continued robust spending, the savings rate continues to remain low at 3.9%. 

31st May 2024

Key takeaway: Chronologically, CPI data comes a couple of weeks before the PCE data is released. To some extent, the excitement surrounding PCE is hence diminished even though it is the Fed’s preferred inflation gauge. After a softer CPI print for April, the PCE print was widely expected to be soft as well. However, it surprised everyone by coming in even softer than was expected. The PCE Price Index for April was at 2.7% y-o-y, holding steady at the same level as the previous month of March. Likewise, the monthly print also held steady at 0.3%. However, Core PCE printed slightly lower than expectations and that proved to be sufficient to send the Dow up 500 points! Irrespective of the volatility in monthly prints, the bottom line remains that the last mile inflation in indeed turning out to be harder to quell. That will always keep a lid on interest rate cut expectations even though the Fed keeps looking at the slightest opportunity to re-introduce cuts back into market expectations. The other major takeaway from the latest release was a 0.1% drop in real personal consumption expenditures. However, the data does not show a meaningful downward trend in consumption expenditures even though April recorded a negative print. On this front, it remains key to observe any weakness in monthly Retail Sales data and quarterly GDP prints. Lastly, personal income continued to rise at a healthy 0.3% rate in the month of April primarily driven by wages and personal income receipts. Given the continued robust spending, the savings rate continues to remain low at 3.7%. 

26th Apr 2024

Key takeaway: Post 3 continuous hotter-than-expected CPI prints, the March PCE print was widely expected to be hot as well. And it did not disappoint. The PCE Price Index for March was up 2.7% accelerating from the 2.5% rate seen in February. Core PCE Price Index was the same as February at 2.8%. However, this was higher than consensus estimates of 2.6%. In any case, it is now firmly established that the last mile in the inflation conquest is turning out to be very difficult, as some market participants had forecasted. Add to the latest adverse data points, was the 1st quarter GDP estimate which also had the worst of both outcomes – higher inflation and slower growth. Personal Income registered a 0.5% increase from the previous month – mostly on account of rise in compensation of employees. Consumption also continued to be strong at 0.8% over previous month in nominal terms and 0.5% in real terms. Given the continued robust spending, the savings rate continues to remain low at 3.5%. 

29th Mar 2024

Key takeaway: February PCE data was in line with expectations. In fact, the Fed Chair had slipped out the 0.3% m-o-m number at the Fed meeting press conference earlier in the month. Headline PCE Index increased 0.3% m-o-m and 2.5% y-o-y. That was a slight acceleration from the 2.5% recorded last month. Core PCE, which is the Fed’s preferred measure over CPI, also increased 0.3% m-o-m and 2.8% y-o-y. Prices for goods increased 0.5% and prices for Services increased 0.3%. Inflation still remains well above the Fed’s 2.0% target. However the important thing to note is that Core PCR at 2.8% is not too far from the 2.6% that the Fed expects to hit in 2024. Should inflation stay around these levels, it is reasonable to assume the first rate cut as early as June. Personal income growth had recorded a very strong 1.0% in January. Income growth moderated to 0.3% in February. Due to sticky inflation and a moderate wage increase, real disposable income growth was negative – the first in the past 6 months. However, Personal consumption expenditure still remained very strong. On a nominal basis, PCE increased 0.8% m-o-m and adjusted for inflation, it increased 0.4%.

29th Feb 2024

Key takeaway: With the big upside surprise in the January CPI print, expectations were set for the January PCE print due to be released in February end. Markets were expecting a leg up on both headline PCE and Core PCE and the actual numbers were quite in line with expectations. Headline PCE grew 0.3% m-o-m and Core PCE came in 0.4% m-o-m. That put headline y-o-y PCE at 2.4%, still lower than 2.6% of December. Similarly, y-o-y Core PCE recorded 2.8%, still lower than 2.9% in December. Yet, the bottom line remains that inflation for January was hotter than market expectations and that has caused a repricing of rates and a change in the immediate outlook. Risk markets though, have taken this in their stride and the march up continues. The other key point to note in this latest PCE data release was that Personal income growth recorded a very strong number at 1.0% m-o-m. However, it was not on account of just wage increases. A large part of the m-o-m increase reflected increases in government social benefits led by social security benefits due to a 3.2% cost of living adjustment. Personal consumption expenditure, on a nominal basis, was actually soft at 0.2% m-o-m. Goods consumption decreased by 1.2%. Services consumption continued to register solid increases : 1.0% m-o-m in January.

26th Jan 2024

Key takeaway: Inflation data continues to get more supportive by the day of a strong disinflation case and the Fed undershooting its 2% Core PCE target. However, what makes the scenario all the more interesting is that economic growth still seems to be more than robust at a time when inflation is falling rapidly. In the latest print for December 2023, headline PCE remained at 2.6% same as November and Core PCE fell substantially – once again surprising to the downside vis-a-vis consensus expectations. The Core PCE Price Index – the Fed’s preferred gauge of inflation – printed at 2.9% vs 3.2% in November and a consensus expectations of 3.0%. Market participants and commentators have been voicing strongly that shorter term annualized PCR inflation numbers have already been undershooting the Fed’s target for a few months now. The 3 month annualized Core PCE has been below the Fed 2% target level for 5 continuous months. The 6 month annualized Core PCE has been below 2% for 2 months in a row. Core services ex-housing has moderated down to 3.3% as of the end of December. While this still doesn’t mean the Fed will cut rates in a hurry, it will be tracking this trend closely for sure. Strong economic growth keeps alive the fears of a resurgence of inflation. My own personal take though is that the Fed is likely to cut sooner than some people estimate – likely April / May meeting if not the March meeting. Personal income growth was also relatively stable at 0.3% m-o-m. Personal consumption expenditure, on a nominal basis, jumped sharply to 0.7% m-o-m. Goods consumption increased by 0.9%. Services consumption continued to register solid increases : 0.6% m-o-m in December.

22nd Dec 2023

Key takeaway: Inflation data is getting more supportive by the day of a strong disinflation case and the Fed undershooting its 2% Core PCE target. In the latest print for November 2023, both headline PCE and Core PCE fell substantially – once again surprising to the downside vis-a-vis consensus expectations. Headline PCE Price Index for November printed at 2.6% y-o-y (much lower than a downwardly 2.9% in October) and minus 0.1% m-o-m. Both numbers were lower than consensus expectations. Similarly, core PCE Price Index – the Fed’s preferred gauge of inflation, also came in lower than expectations at 3.2% y-o-y and 0.1% m-o-m. The y-o-y figure, similar to headline PCE, was much lower than October. The more important point to note is that the 3 month annualized Core PCE has been below the Fed 2% target level for 4 continuous months. While this still doesn’t mean the Fed will cut rates in a hurry, it will be tracking this trend closely for sure. Personal income growth was also relatively strong at 0.4% m-o-m. Personal consumption expenditure, on a nominal basis, was 0.2% m-o-m. Goods consumption decreased by 0.2%. Services consumption continued to register solid increases : 0.5% m-o-m in November.

30th Nov 2023

Key takeaway: The clamour has been increasing for a soft landing on the back of inflation steadily trending down. This view got some further support from the latest PCE data. Headline PCE Price Index for October printed at 3.0% y-o-y (much lower than 3.4% in September) and 0.0% m-o-m. Both numbers were mostly in line with expectations. Similarly, core PCE Price Index – the Fed’s preferred gauge of inflation, also came in mostly in line with expectations at 3.5% y-o-y and 0.2% m-o-m. The figures, similar to headline numbers, were much lower than September. The more important point is that most recent months have seen a relatively muted Core PCE Price Index print and the 6 month annualized core PCE is now approximately 2.6%. This is the same as the Fed’s median expectation for Core PCE in 2024. No wonder markets have started pricing in a rate cut by mid 2024 and folks like Bill Ackman forecasting a rate cut by March! Yet, this is the time to not through caution to the wind. The move back down to 2% is likely to be much more bumpy if not difficult. Personal income growth was also muted at 0.2% m-o-m. Personal consumption expenditure, on a nominal basis, was also relatively low at 0.2% m-o-m. Durable goods consumption decreased sharply by 0.5%. Services consumption continued to register solid increases : 0.4% m-o-m in October.

27th Oct 2023

Key takeaway: Headline PCE Price Index for September printed at 3.4% y-o-y (same as 3.4% in August) and 0.4% m-o-m, mostly in line with expectations. Similarly, core PCE Price Index – the Fed’s preferred gauge of inflation, also came in mostly in line with expectations at 3.7% y-o-y and 0.3% m-o-m. The more important point is that the year over year increase is now in the 3 handle range and at a level that the Fed would be more comfortable with. Yet, the move back down to 2% is likely to be much more difficult. Personal income growth was 0.3% m-o-m. Personal consumption expenditure, on a nominal basis, continues to be relatively high – at 0.7% m-o-m. Durable goods consumption increased sharply by 1.0%. Services consumption continued to register solid increases : 0.8% m-o-m in September.

29th Sep 2023

Key takeaway: Headline PCE Price Index for August printed at 3.5% y-o-y (up from 3.4% in July) and 0.4% m-o-m, mostly in line with expectations. The slight increase in y-o-y was expected given base effects and the recent rise in gas prices. However, more importantly, core PCE Price Index – the Fed’s preferred gauge of inflation, moderated for the first time in recent history into the 3 handle : 3.9% in August from 4.3% in July. The monthly print was also fairly low at 0.1%. This is welcome news from the Fed’s perspective. Personal income growth, on the other hand, accelerated to 0.4% m-o-m, keeping the pressure on any  signs of a wage price spiral. Personal consumption expenditure, on a nominal basis, continues to be relatively high – at 0.4% m-o-m. Durable goods consumption decreased 0.6% m-o-m. But services consumption continued to register solid increases : 0.4% m-o-m in August.

31st Aug 2023

Key takeaway: For the past 2 months of May and June, not only had PCE Price Index fallen on a y-o-y basis, it had also surprised to the downside compared to consensus expectations. In contrast, the PCE price Index rose from 3.0% in June to 3.3% in July. Once again though, this was in line with the consensus expectation given the recent rise in food and energy inflation. Similarly, core PCE Price Index also came in line with expectations at 4.2%. The more important point to note is that this level of around 4% still remains way too high from the Fed’s perspective and the risk of more interest rate increases continues to spook risk markets. Personal Income rose 0.2% in July. This increase continues to be driven by increases in wages – which have grown at a healthy rate over the past 6 months. Overall real wage growth numbers have been strong in Q1 and have moderated a bit in Q2. The Employment Cost Index for Q2 was also lower than expectations at 1.0% (vs 1.1%). As long as inflation remains low, the Fed can breathe easy. Any turn in inflation numbers will bring wage growth into sharp focus again. Lastly, Personal consumption expenditure increased a significant 0.8% m-o-m. This print was much higher than the consensus estimate and once again highlights a resilient consumer.

28th Jul 2023

Key takeaway: For a second month in a row, headline inflation has surprised to the downside. Headline PCE Index increased 0.2% m-o-m and 3.0% y-o-y in June 2023. Inflation has been consistently beating expectations on the downside over the past few months and risk assets are cheering this development. Ironically, there hasn’t been a corresponding move lower in shorter tenor risk free rates like the 1 or 2 year US Treasury. In other words, the fixed income markets are continuing to expect rates to remain higher for longer even though inflation has been declining. The Fed’s preferred gauge of Core PCE also moderated further in June (0.2% m-o-m and 4.1% y-o-y). Personal Income, on a nominal basis, increased 0.3% in June – which is near the average increase of the past 6 months. However, Real Disposable Personal Income came in relatively soft at 0.2% m-o-m. Overall real wage growth numbers have been strong in Q1 and have moderated a bit in Q2. The Employment Cost Index for Q2 (which came in the same day) was also lower than expectations at 1.0% (vs 1.1%). As long as inflation remains low, the Fed can breathe easy. Any turn in inflation numbers will bring wage growth into sharp focus again. 

30th Jun 2023

Key takeaway: Headline inflation surprised to the downside in May by a fairly substantial margin. It was little surprise that markets cheered the low inflation print. Headline inflation came in a 0.1% m-o-m, substantially lower than consensus estimate of 0.5%. The y-o-y number also hence was a surprise to the downside at 3.8%. The Fed’s 2% mandate on PCE starts to look within striking distance! However, core PCE still held firm at 0.3% m-o-m. On a y-o-y basis, Core PCE Index at 4.6% is still to high for the Fed’s comfort. The other key point to note in the latest May release was Personal Income growth at 0.4% m-o-m. However, what is even more pertinent to note is that with falling inflation real wages are growing even faster. Real personal income excluding transfer receipts grew 0.3% m-o-m. Real disposable income, which nets out taxes, grew at 0.3% m-o-m as well. These are strong real wage growth numbers. And can potentially keep boosting domestic spending. For instance – Real disposable income grew 8.5% on an annualized basis in Q1 2023. As long as inflation remains low, the Fed can breathe easy. Any turn in inflation numbers will bring wage growth into sharp focus again. 

26th May 2023

Key takeaway: Another month, another high inflation data print! Month after month, market participants and the Fed keep expecting a rapid decline in inflationary pressures and the data keeps disappointing. The PCE is the Fed’s preferred inflation gauge and hence is a key data point. The core issue is not whether inflation has peaked. That it likely has. The core issue is that the rapid decline in inflation which is necessary for the economy is nowhere to be seen. Core PCE, which is the Fed’s preferred measure which had moderated in Feb (0.4%) and March (0.3%) from a hot Jan print (0.6%), was steady once again in April at 0.4% (slightly higher than consensus expectations). The Core PCE Price Index has hovered around the 4-5% mark for almost a year now. The other key point to understand is also the constant growth in nominal wages and salaries. Personal income grew at 0.4% m-o-m in April primarily driven by an increase in wages and salaries. This continued increase in wages keeps the Fed on its toes watching out for a wage price spiral. Even the key ECI for Q1 had come in hotter than expected a month back. Lastly, real personal spending while lower than previous year levels, is still not fallen to levels seen in prior recessionary periods.

28th Apr 2023

Key takeaway: Another month of high inflation data! Month after month, market participants and the Fed keep expecting a rapid decline in inflationary pressures and the data keeps disappointing. Core PCE, which is the Fed’s preferred measure which had moderated in Feb (0.3%) from a hot Jan print (0.5%), was steady once again in March at 0.3% (in line with consensus expectations). However, the “immaculate disinflation” that people were hoping for is still not coming through. Firstly, overall personal income is keeping pace (grew 0.3% in Mar). Wages and salaries have been growing (0.3% in Mar). Personal consumption expenditures (even though flat 0% m-o-m) were higher than consensus expectations of a decrease of 0.1%. On the balance, the report – while not inflationary – does not help the rapid decline of inflation theory. This makes the 25 basis points hike in May a certainty – almost! Another key data point which came in the same day as the PCE report was the quarterly Employment Cost Index. The Fed monitors this Index very closely. ECI printed hotter than expected – at 1.2% vs expectations of 1.1%.

31st Mar 2023

Key takeaway: Core PCE, which is the Fed’s preferred measure, moderated in Feb (0.3%) from a hot Jan print (0.5%). The Jan data was also revised down from 0.6% to 0.5%. However, overall inflation levels still remain high (Core of 5% on a y-o-y basis and roughly 4.7% on a 3-month annualized basis). Hence, it is difficult to infer that the Fed will take some comfort from this moderated PCE Feb release. On the other hand, spending data for January was revised substantially higher – both nominal as well as real. Which still indicates resilient consumption. This resilient consumption is partly driven by continuing growth in nominal and real income. For instance – Compensation of employees grew 0.9% in Jan and a further 0.3% in Feb. Similarly, real disposable personal income grew 1.5% in Jan and a further 0.2% in Feb. These are solid income numbers and combined with a still healthy job market, they can keep upward pressure on inflation.

24th Feb 2023

Key takeaway: After a hotter than expected Jan CPI print, it was expected that PCE price data would be worse than most market participants were expecting a few weeks back. And it indeed was! The fact that this is officially the Fed’s preferred inflation gauge makes it that much more important. Core PCE grew at a rate of 0.6% in Jan. On a 3 month annualized basis, it amounts to 4.7% – which is way above the Fed’s comfort levels. After having recorded declines in personal consumption in Nov and Dec, both on a nominal and real basis, personal consumption shot up in Jan (1.8% on a nominal basis and 1.1% on a real basis). Most importantly though, this data release was not just about personal spending and increasing price indexes. Personal income grew at a significant rate of 0.6% m-o-m – largely driven by wages which grew at 0.9% m-o-m. That is quite concerning from the Fed’s perspective. Even, real disposable personal income – which takes into account inflation on a m-o-m basis, grew at a rate of 1.4%!

27th Jan 2023

Key takeaway: One of the most important economic data points for the start of 2023 is in and it does not disappoint. Core PCE was 4.4% for the year and 0.3% for the month of December – both figures were in line with consensus estimates. Services PCE Price Index was still relatively elevated at 0.5%, but goods PCE Price Index fell a further 0.7% m-o-m having declined 0.4% in November as well. On the downside, even though price indexes are rapidly coming down, consumption is falling fast as well. Nominal PCE fell 0.2% m-o-m after falling o.1% in November. Similarly on a price adjusted real basis, consumption decline accelerated to 0.3% m-o-m from 0.2% in November. Lastly, while nominal person income growth slowed further, the next few months will provide a clearer picture if inflation is likely to remain sticky because of robust nominal wage growth (or does a soft landing actually materialise?)

23rd Dec 2022

Key takeaway: Both, headline (at 0.1%) and core PCE (at 0.2%) moderated in November 2022 from the previous month’s reading (headline of 0.4% and core of 0.3%). But the more important point to note in this latest PCE report was that Services Inflation (that the Fed is so laser focused on), still remained quite elevated at 0.4%. Nominal wages, which are a key component of Personal Income, still grew at 0.5% m-o-m. While this can be construed as a good outcome, the real risk lies in real wages increasing substantially (with inflation coming down) and exacerbating risks of a wage price spiral. Personal spending, similar to the price indexes, showed robust increases in services and significant decline in goods consumption. Lastly, the personal savings rate remained unchanged (and relatively low) at 2.4% which evidences the economic hardship a high inflation rate places on consumers in general. 

1st Dec 2022

Key takeaway: Lets take a step back and understand why the Personal Income and Outlays data is so critical to markets. Firstly, Core PCE is the Fed’s preferred price gauge. Second, within the inflation sphere, labour inflation (which is the core of services inflation) is their prime focus. With that in mind lets evaluate the latest release. Headline PCE Price Index growth fell to 0.3% m-o-m and Core fell to 0.2% m-o-m. That was good news and in line with the big CPI positive surprise earlier in the month. However, Services PCE Price Index still increased at a substantial 0.4% m-o-m (an annualized rate of 4.8%). Second, and more importantly, nominal Personal Income driven by wages accelerated to a significant 0.7% m-o-m (the highest in the last 8 months). Finally, in another uncomfortable signal, Goods PCE Price Index increased 0.3% m-o-m after having decreased for the last 3 months. A large contributor to the increase was motor vehicles and parts. BEA data also shows that total vehicle sales in the US remain at a high of 15.9 mn annualized units and infact have increased since the May 2022 number of 13 mn. In summary, while both CPI and PCE bore good news from an inflation perspective, it is too early to say we are out of the woods. Lastly, even though nominal wages are increasing, high inflation is eating into the consumer’s spending ability and personal savings rates are continuously falling (2.3% in Oct) – which ultimately indicates a slowing economy ahead. 

28th Oct 2022

Key takeaway: There has been a bear market rally of late. Sentiment has turned a bit. Headline 3Q GDP number came in fairly strong and 3Q PCE was also a decent 1.4%. Similarly, the September PCE growth was a decent 0.3%. Unfortunately, this latest PCE report gave scant indications of softening price pressures. Core PCE Price Index still increased 0.5% m-o-m similar to August. In fact the fall in goods prices moderated in September, while Services kept up its pace of increase. To make matters worse, wage growth further accelerated to 0.6% in September from 0.3% in August.  

30th Sep 2022

Key takeaway: Unfortunately, similar to the August CPI read, PCE for August also came in worse than expected despite a fall in energy costs. Core PCE, which is the most important indicator for the Fed, rose a significant 0.6% m-o-m. Headline PCE rose 6.2% for the year. These numbers are still far outside the Fed’s comfort zone. But there are a few more points to note. For a few months now, we have had a consistent fall in goods consumption and the goods price index. But that has been more than offset but the consumption and consequent price rise of Services. The second positive point to note was that wage growth moderated to 0.3% (from 0.8% in July).  

26th Aug 2022

Key takeaway: I think this was a mixed report. Here’s why. Firstly, core inflation continued to moderate. Core PCE in July increased only 0.1%. Headline PCE was negative 0.1% m-o-m, but that was expected given the fall in gasoline prices in July. Unfortunately, markets were laser focused today on Powell’s JH hawkish speech and ignored a favorable inflation reading. On the other hand though, compensation increased at a brisk pace of 0.8% in July. Wage price pressures are the key focus area for the Fed and they likely would be concerned with continued wage gains.  

29th July 2022

Key takeaway: After a dip of 0.3% in May, real PCE was back up – but only 0.1%. Disposable Personal Income, meanwhile, is failing to catch up – falling 0.3%. i.e. There is lesser money in people’s pockets for spending. PCE, the preferred Fed inflation gauge, climbed back up again to 6.8% y-o-y in June compared to 6.3% in May (Core inflation also climbed back up again to 4.8% from 4.7%). The monthly PCE increase was a bit of a shocker as well (1.0% compared to 0.6% in May). There will be one more PCE print and 2 more CPI prints before the next Fed meeting on Sep 20th. It is a cliché repeated so very often – but those prints will be key to the “Fed pivot”! 

30th June 2022

Key takeaway: It was one of those days in markets, when all news is bad news! Core inflation is showing all the necessary signs of slowing. But more importantly the quantum of these inflation slowing signals is not sufficient for a Fed pivot. Key points from this release : a) Core PCE slowed down to 4.7% (fourth continuous month of decline).  b) Revised real consumption numbers now show that consumption in the first 4 months was lower that reported earlier. Those accumulating Target inventories make even more sense now! c) May was the first time in many months that real consumption actually decreased m-o-m! d) Most figures came in lower than consensus estimates.  

The next CPI release is on Jul 13th and the Fed meets post that on 26-27th. If headline CPI moderates, there is a good chance that the next rate hike settles at 50 instead of 75!

27th May 2022

Key takeaway: There are lots of key points to note in this release. Firstly, core PCE – which is the Fed’s preferred measure, moderated in April : 4.9% vs 5.2% in March. However, that was not the only positive development. Consumption continued to be strong. Real PCE – adjusted for inflation – increased 0.7% in April. And that on the back of a strong Jan, Feb and March. However, consumers are dipping into their savings. While income rose, it is simply not enough to cover price increases. Savings rate fell to 4.4% from 5% in March 22 (Sep 2021 was 8.1%!)

29th April 2022

Key takeaway: The March 22 Personal Income and Outlays release once again shows that the US consumer is very strong. The Feb release had cast some doubt on the strength of consumer spending when Feb real PCE fell 0.4%m-o-m. But the Feb figure was revised upward to +0.1% and March real PCE was up 0.2% m-o-m.  Spending on goods fell and spending on service rose – as expected. But, inflation remains stubbornly high, impacting consumers ability and willingness to spend. Real Disposable Personal Income fell 0.4% m-o-m.

31st Mar 2022

Key takeaway: Post this release, a lot of news headlines might scream “consumer spending slows sharply!”. Lets not get carried away yet. This is just one data point. Inflation adjusted consumer spending indeed fell 0.4% m-o-m in February. But, January numbers had been unusually strong (+2.1%). Spending on goods fell and spending on service rose – quite as expected. But if these numbers keep trending down, then the inflationary impact on people’s ability and willingness to spend would become evident! Keep tracking…

25th Feb 2022

Key takeaway: Inflation adjusted consumer spending had fallen by 1% in December 2021, probably because of a pull forward of purchases in the holiday season. Consumption in Jan 2022, on the other hand, has surprised to the upside. The rise in nominal spending is then, not just on account of price rises, but also attributable to simply increased consumption. Tailwind for monetary policy tightening!

 

Bureau of Economic Analysis

Personal Income and Outlays (P&O) is a key U.S. economic report by the Bureau of Economic Analysis (BEA) tracking total income (wages, investments, government payments), spending (Personal Consumption Expenditures, or PCE), and savings, using government data & trade estimates to inform policy, with its core PCE price index being the Fed’s preferred inflation gauge, calculated as Income – Spending – Taxes.