Core PCE rises to 4.9%; US Jobs report, manufacturing data in next week’s economic calendar

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The Bureau of Economic Analysis (BEA) release published today showed that the core personal consumption expenditures price index (PCE) inflation unexpectedly rose to 4.9% Y-o-Y above July’s upward revision to 4.7%.

Month-over-month, the core PCE accelerated 0.6% against a rise of 0.1% in the previous reading, and above expectations of 0.5%.

Headline PCE moderated to 6.3% Y-o-Y, while month over month rose 0.3%.

Hotter than expected inflation data despite falling international energy prices suggests that the Fed’s hawkish stance and the tough rhetoric at Jackson Hole are yet to take effect, banishing any doubts that the Fed may look to slow its rate hikes and putting a soft landing well out of reach.

Larry Shover, Chief Investment Officer at D. Alexander Capital said,

We have had significant declining gasoline prices, so that should help a lot with the consumer…we also have the implied negative wealth effect of the stock market, domestic equities have fallen off the map over the last couple of months….perhaps declining gasoline prices which people hold so dearly helps with spending, of course. Maybe that is what causing a lot of these numbers to be hotter than I expected.

Across global markets, stocks have plunged, bond market yields rallied sharply, central banks have stepped in with extraordinary measures, and in the US, the housing market is showing signs of cooling off with mortgage rates touching 7% (as noted in an earlier article).

Continue reading our residential real estate news for the latest updates on the housing market.

In addition, the overall PCE was up 7.3% on an annual basis for Q2, against an estimate of 7.1%.

Christopher Rupkey, Chief Economist at FWDBONDS added,

The Fed won’t be slowing the pace of their rate hikes yet with 75 basis points in November and 50 basis points more in December a virtual certainty…

Fresh personal spending and income data released by the BEA was also higher than expected with month-on-month growth of 0.4% and 0.3%, respectively as against estimates of 0.2% for each.

US Economic Calendar

  • S&P Manufacturing PMI: Monday, 3rd October
  • ISM Manufacturing Index: Monday, 3rd October
  • Job openings and Quits Data: Tuesday, 4th October
  • ADP employment report: Wednesday, 5th October
  • Non-farm payrolls: Friday, 7th October

Global Economic Calendar

Next week’s important economic events will include:

  • Japanese Manufacturing Outlook: Monday, 3rd October
  • Euro Area S&P Global Manufacturing PMI: Monday, 3rd October
  • Euro Area S&P Global Services and Composite PMI: Wednesday, 5th October
  • German Trade Outlook: Wednesday, 5th October

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