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PCE Price Index In-Line, +6.2% Year Over Year

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Friday, September 30, 2022

We close out an eventful week on Wall Street with a comprehensive report on Personal Consumption Expenditures (PCE) for August, with results mostly in-line with expectations, as per normal. PCE Price Index figures are derived from a number of previously released data, like Retail Sales, so they don’t typically offer big surprise swings in either direction.

Headline PCE month over month reached +0.3%, as expected, following the -0.1% posted for July. The core read — stripping away more transitory aspects of consumer spending, food and energy — doubled the overall headline to +0.6%, 10 basis points (bps) hotter than expected and well above the 0.0% presented for the previous month.

The main aspect of these figures market participants pay closer attention to are the year over year numbers: +6.2% for the PCE Price Index, down 20 bps from July. Core year over year reached +4.9%, 20 bps above consensus and the upwardly revised previous month read. This suggests “transitory” inflation metrics have somewhat been absorbed into the stickier parts of the economy, making inflation more difficult to tame.

That said, +4.9% on core, while still historically high, is well below the +6.8% we saw in June of this year, which was the highest print we’d seen since Ronald Reagan’s first year as President. What we would rather see, of course, is these numbers come down on core as well as headline to have a better grasp of controlling overall inflation metrics. Clearly this is still a work in progress.

Real Consumer Spending for August swung to +0.1% from -0.1% in July, while Real Disposable Income for August posted an identical +0.1%, but which has come down notably from the +0.5% for the previous month. The demonstrates the consumer remains relatively undaunted in its purchases, even as extra cash in their paychecks may not be what they were just recently.

Market futures are flat, after a topsy-turvy past several days. Bullish traders will continue to seek a ramp to the highway, though even today's green shoots currently appear like dip-buying. It's the last day of the quarter, after all, and it's a Friday before earnings season. Thus, we don't expect crazy trading volumes or a big push in either direction. We look to finish the week in the red over all.

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