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The biggest economic print in a week full of them came out this Friday morning, Personal Consumption Expenditures (PCE), the Fed’s self-proclaimed preferred inflation metric, came in-line on month over month headline for December: +0.2%, jumping from -0.1% posted the previous month. It’s also the first positive month-over-month read since September of 2023. Year over year PCE headline also came in-line at +2.6% — flat from the previous month, and continuing the lowest levels of PCE inflation since February of 2021 (when things were moving very much in the opposite direction).
The real money, however, is in the core data — or such goes the perception: December core PCE month over month was up the expected +0.2%, higher than the +0.1% in November. (Core refers to stripping out potentially volatile food and energy costs.) Year over year core PCE notched its first sub-3% print since March of 2021: +2.9%. We got there a tad quicker than anticipated (estimates were for +3.0% in December), but still along a steady course, one the Fed would consider rather optimum.
Also in this data set are Personal Income and Consumer Spending figures: +0.3% on month-over-month income growth was as expected, and a tad cooler than the previous month’s +0.4%. But personal spending jumped way up to +0.7%, 20 basis points (bps) higher than analysts had projected and a half-point higher than November. We matched this +0.7% in September, but it’s been almost a full year since we were higher than this. The red flag (pink flag?) here is that we’re spending our way past recession — this is generally understood to not be a long-term solution.
Real Spending for December reached +0.5% was better than expected, and the biggest monthly number since July (the last time we were hotter on Real Spending was +1.0% back in January of last year. Again, our remedy for a strengthened economy — staring down, as we have for a year or more, a recession that has not come — arise from the consumer’s wallet, presumably their credit card. We’ll see over time, once the holiday shopping season smoke has cleared, whether we continue this trend or a more fiscally responsible development helps descend inflation (and cools the economy further).
Pre-markets are quite favorable to these figures: we were looking at red across the major indices (-90 on the Dow and Nasdaq, -10 points on the S&P 500), but have now turned around. We’re currently +10 on the Dow and +5 on the S&P. The Nasdaq is still -30 points at this hour, although it is up over 1000 points (the Nasdaq 100) from the start of the year. Nobody should be concerned if the Nasdaq lets a little air out today.
Speaking of consumer spending, American Express (AXP - Free Report) reported Q4 results that were a fraction lower than expected year over year, but with a big upward guidance for 2024: 9-11% revenue growth forecast. A credit card company seeing big numbers ahead says as much about consumer spending as today's PCE data set has. Shares of AXP are up +1.75% on the news. It's the third-straight earnings beat for AmEx.
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PCE Inflation Comes in Line With Expectations
The biggest economic print in a week full of them came out this Friday morning, Personal Consumption Expenditures (PCE), the Fed’s self-proclaimed preferred inflation metric, came in-line on month over month headline for December: +0.2%, jumping from -0.1% posted the previous month. It’s also the first positive month-over-month read since September of 2023. Year over year PCE headline also came in-line at +2.6% — flat from the previous month, and continuing the lowest levels of PCE inflation since February of 2021 (when things were moving very much in the opposite direction).
The real money, however, is in the core data — or such goes the perception: December core PCE month over month was up the expected +0.2%, higher than the +0.1% in November. (Core refers to stripping out potentially volatile food and energy costs.) Year over year core PCE notched its first sub-3% print since March of 2021: +2.9%. We got there a tad quicker than anticipated (estimates were for +3.0% in December), but still along a steady course, one the Fed would consider rather optimum.
Also in this data set are Personal Income and Consumer Spending figures: +0.3% on month-over-month income growth was as expected, and a tad cooler than the previous month’s +0.4%. But personal spending jumped way up to +0.7%, 20 basis points (bps) higher than analysts had projected and a half-point higher than November. We matched this +0.7% in September, but it’s been almost a full year since we were higher than this. The red flag (pink flag?) here is that we’re spending our way past recession — this is generally understood to not be a long-term solution.
Real Spending for December reached +0.5% was better than expected, and the biggest monthly number since July (the last time we were hotter on Real Spending was +1.0% back in January of last year. Again, our remedy for a strengthened economy — staring down, as we have for a year or more, a recession that has not come — arise from the consumer’s wallet, presumably their credit card. We’ll see over time, once the holiday shopping season smoke has cleared, whether we continue this trend or a more fiscally responsible development helps descend inflation (and cools the economy further).
Pre-markets are quite favorable to these figures: we were looking at red across the major indices (-90 on the Dow and Nasdaq, -10 points on the S&P 500), but have now turned around. We’re currently +10 on the Dow and +5 on the S&P. The Nasdaq is still -30 points at this hour, although it is up over 1000 points (the Nasdaq 100) from the start of the year. Nobody should be concerned if the Nasdaq lets a little air out today.
Speaking of consumer spending, American Express (AXP - Free Report) reported Q4 results that were a fraction lower than expected year over year, but with a big upward guidance for 2024: 9-11% revenue growth forecast. A credit card company seeing big numbers ahead says as much about consumer spending as today's PCE data set has. Shares of AXP are up +1.75% on the news. It's the third-straight earnings beat for AmEx.