Ahead of today’s open, pre-market futures are climbing higher on mostly expected results from August Personal Consumption Expenditures (PCE) this morning. The Dow is currently up +225 points, the S&P 500 +28 and the Nasdaq +105 points. Even the small-cap Russell 2000, which was in the red ahead of the PCE release, is +6 points at this hour.
PCE Index Numbers In-Line: +0.3%, +2.7%
PCE reports come with a whole host of numbers, starting with income and spending metrics for the prior month. Personal Income for August was 10 basis points (bps) warmer than anticipated at +0.4%, equalling July. Personal Spending was also 10 bps above consensus at +0.6%, also warmer than the +0.5% reported for the prior month.
These are good numbers for those looking for signs of overall strength in the U.S. economy. “Real” Spending, adjusted for inflation, reached +0.3% last month — still warmer than we’d like to see for advanced interest rate cuts from the Fed going forward, but well below the year-to-date high of +0.7% back in March.
The headline PCE Index was right in line with expectations at +0.3%, 10 bps warmer than the prior month but below the +0.4% reported back in February. Core PCE month over month — subtracting volatile food and energy expenditures — actually cooled 10 bps to +0.2% from July, and as anticipated.
Year over year, headline PCE came in at +2.7% — as expected, but also matching multi-year highs last reached in February, and 10 bps above the previous month. Core PCE year over year was in-line with expectations at +2.9%. This is a smidge below the +2.95% we saw back in February.
What PCE Means for Inflation, the Fed & Interest Rates
The easy answer here is that investors love these numbers for good reason: the economy is not rudderless and consumers are doing their part pushing forward. Inflation is still present, but not running out of control. And yet the Fed is still in the mode of reducing interest rates to help ease some pressure on the labor market.
What it also means, especially teetering on 3% core PCE year over year, is that deeper cuts (50 bps per meeting, for instance) to the Fed funds rate are not likely in the cards. The Fed still considers its current rate of 4.00-4.25% to be mildly restrictive, which may be interpreted as holding inflation somewhat in place. Their goal is still 2% inflation, which they won’t get by continually cutting rates, but at least they’ve tamped down the +5.6% PCE core we were seeing back in September of 2022.
What to Expect from the Stock Market Today
This was the biggie for this Friday, although we do expect a final University of Michigan Consumer Sentiment survey to come out after the opening bell today. The 55.4 reported in the preliminary issue is expected to hold — down a bit from the 60+ levels we were seeing in June and July, but still above the low 50s we saw this past spring.
Image: Bigstock
PCE Index Increased In Line With Expectations
Ahead of today’s open, pre-market futures are climbing higher on mostly expected results from August Personal Consumption Expenditures (PCE) this morning. The Dow is currently up +225 points, the S&P 500 +28 and the Nasdaq +105 points. Even the small-cap Russell 2000, which was in the red ahead of the PCE release, is +6 points at this hour.
PCE Index Numbers In-Line: +0.3%, +2.7%
PCE reports come with a whole host of numbers, starting with income and spending metrics for the prior month. Personal Income for August was 10 basis points (bps) warmer than anticipated at +0.4%, equalling July. Personal Spending was also 10 bps above consensus at +0.6%, also warmer than the +0.5% reported for the prior month.
These are good numbers for those looking for signs of overall strength in the U.S. economy. “Real” Spending, adjusted for inflation, reached +0.3% last month — still warmer than we’d like to see for advanced interest rate cuts from the Fed going forward, but well below the year-to-date high of +0.7% back in March.
The headline PCE Index was right in line with expectations at +0.3%, 10 bps warmer than the prior month but below the +0.4% reported back in February. Core PCE month over month — subtracting volatile food and energy expenditures — actually cooled 10 bps to +0.2% from July, and as anticipated.
Year over year, headline PCE came in at +2.7% — as expected, but also matching multi-year highs last reached in February, and 10 bps above the previous month. Core PCE year over year was in-line with expectations at +2.9%. This is a smidge below the +2.95% we saw back in February.
What PCE Means for Inflation, the Fed & Interest Rates
The easy answer here is that investors love these numbers for good reason: the economy is not rudderless and consumers are doing their part pushing forward. Inflation is still present, but not running out of control. And yet the Fed is still in the mode of reducing interest rates to help ease some pressure on the labor market.
What it also means, especially teetering on 3% core PCE year over year, is that deeper cuts (50 bps per meeting, for instance) to the Fed funds rate are not likely in the cards. The Fed still considers its current rate of 4.00-4.25% to be mildly restrictive, which may be interpreted as holding inflation somewhat in place. Their goal is still 2% inflation, which they won’t get by continually cutting rates, but at least they’ve tamped down the +5.6% PCE core we were seeing back in September of 2022.
What to Expect from the Stock Market Today
This was the biggie for this Friday, although we do expect a final University of Michigan Consumer Sentiment survey to come out after the opening bell today. The 55.4 reported in the preliminary issue is expected to hold — down a bit from the 60+ levels we were seeing in June and July, but still above the low 50s we saw this past spring.