Core PCE (excluding food & energy):
- Prior was +2.6% (revised to +2.7%)
- Core m/m +0.4% vs +0.3% exp
- Unrounded core PCE +0.38% vs +0.285% m/m prior
- PCE excluding food, energy and housing % m/m vs +0.3% m/m prior
- Supercore (services ex-shelter) % m/m and % y/y
- Services inflation +0.375% m/m
Headline PCE
- Headline PCE +2.5% y/y vs +2.5% expected
- Deflator +0.3% m/m vs +0.3% expected
- Unrounded headline +0.34% vs +0.325% m/m prior
Consumer spending and income for February:
- Personal income +0.8% vs +0.4% expected. Prior month +0.9% (revised to +0.7%)
- Personal spending +0.4% vs +0.5% expected. Prior month -0.2% (revised to -0.3%)
- Real personal spending +0.1% vs -0.5% prior (revised to -0.6%)
- Savings rate 4.6% vs 4.6% prior
Treasury yields are lower on this despite slightly higher yields. The dollar was little change initially but is now slipping. I suspect the market is a bit more focused on the spending numbers than the inflation data, given tariff worries.
For the Fed, the problem here is that a +0.38% m/m core reading is going to now stick in the index all year and that’s a 4.66% pace, or it’s 20% of your annual inflation allocation. Even if you take Jan and Feb together, core is running at 4.06%, more than double the Fed’s target.
For now, the bond market isn’t concerned but we had Musalem crack open the door to rate hikes this week and that’s a tail risk to watch.
This article was written by Adam Button at www.forexlive.com.
