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47 matches for " PCE Deflator":
The biggest surprise in the revisions to first quarter GDP growth, released yesterday, was in the core PCE deflator.
All eyes today will be on the core PCE deflator for January, following the unexpectedly large 0.3% increase in the core CPI.
It's pretty easy to spin a story that the recent core PCE numbers represent a sharp and alarming turn south.
The downshift in core PCE inflation this year has unnerved the Fed, along with the intensification of the trade war and slower global growth.
Our base-case forecast for the May core PCE deflator, due today, is a 0.17% increase, lifting the year-over-year rate by a tenth to 1.9%.
A steep drop in prices for financial services in January was a key factor behind the sharp slowdown in the rate of increase of the core PCE deflator in the first quarter, relative to the core CPI.
The modest overshoot to consensus in September's core PCE deflator won't trouble any lists of great economic surprises, but it did serve to demonstrate that the PCE can diverge from the CPI, in both the short and medium-term.
This is the final U.S. Economic Monitor of 2017, a year which has seen the economy strengthen, the labor market tighten substantially, and the Fed raise rates three times, with zero deleterious effect on growth.
With Fed officials now in pre-FOMC meeting blackout mode, this week will not bring a repeat of Friday's confusion, when the New York Fed felt obligated to issue a clarification following president William's speech on monetary policy close to the zero bound.
For now, we're happy with our base-case forecast that growth will be nearer 3% than 2% this year, and that most of the rise in core inflation this year will come as a result of unfavorable base effects, rather than a serious increase in the month-to-month trend.
Last week, the Atlanta Fed updated its median hourly earnings series with new October data, showing wage growth accelerating to an eight-year high of 3.9%. That's a full percentage point higher than the increase in this measure of wages in the year to October 2015, and it follows a spring and summer during which wage growth appeared to be topping-out at just under 3½%.
need to add docMea culpa: We failed to spot the press release from the Commerce Department announcing the delay of the release of the advance December trade and inventory data, due to the government shutdown.
We just can't get away from the deeply vexed question of wages; specifically, why the rate of growth of nominal hourly earnings has risen only to just over 2.5%, even though the historical relationship between wage gains and the tightness of the labor market points to increases of 4%-plus.
The two key planks of the argument that a substantial easing of fiscal policy won't be inflationary are that labor participation will be dragged higher, limiting the decline in the unemployment rate, while productivity growth will rebound, so unit labor costs will remain under control.
The FOMC did the minimum expected of it yesterday, raising rates by 25bp--with a 20bp increase in IOER--and dropping one of its dots for 2019.
We're nudging down our estimate of Q2 GDP growth, due today, by 0.3 percentage points to 1.8%, in the wake of yesterday's array of data.
The biggest surprise in the recent inflation numbers has been the surge in the PCE measure of hospital services costs, where the year-over-year rate has jumped to 3.8% in February, an eight-year high, from just 1.3% in September.
It would be astonishing if the Fed doesn't raise rates today, and Chair Powell is not in the astonishment business; they will hike by 25bp.
In the wake of the robust July data and the upward revisions to June, real personal consumption--which accounts for 69% of GDP--appears set to rise by at least 3% in the third quarter, and 3.5% is within reach. To reach 4%, though, spending would have to rise by 0.3% in both August and September, and that will be a real struggle given July's already-elevated auto sales and, especially, overstretched spending on utility energy.
The Atlanta Fed's GDP Now estimate for second quarter GDP growth will be revised today, in light of the data released over the past few days. We aren't expecting a big change from the June 24 estimate, 2.6%, because most of the recent data don't capture the most volatile components of growth, including inventories and government spending. The key driver of quarterly swings in the government component is state and local construction, but at this point we have data only for April; those numbers were weak.
The stock market loved Fed Chair Powell's remarks on the economy yesterday, specifically, his comment that rates are now "just below" neutral.
We learned last week that the U.S. no longer has a coherent dollar policy.
It seems reasonable to think that manufacturing should be doing better in the U.S. than other major economies.
We already have a pretty good idea of what happened to consumers' spending in March, following Friday's GDP release, so the single most important number in today's monthly personal income and spending report, in our view, is the hospital services component of the deflator.
Neither the strength in October consumption nor the softness of core PCE inflation, reported yesterday, are sustainable.
The Fed will do nothing and say little that's new after its meeting today. The data on economic activity have been mixed since the March meeting, when rates were hiked and the economic forecasts were upgraded, largely as a result of the fiscal stimulus.
We have tweaked our third quarter GDP forecast in the wake of the September advance international trade and inventory data; we now expect today's first estimate to show that the economy expanded at a 4.0% annualized rate.
The Fed was more hawkish than we expected yesterday.
We already know that the key labor market numbers in today's May NFIB survey are strong.
We'd be surprised to see any serious shift in the tone of Fed Chair Powell's semi-annual Monetary Policy Testimony today compared to the FOMC statement and press conference just three weeks ago.
The Fed will leave rates unchanged today.
The Fed shifted its stance significantly in June, so we're expecting only trivial changes in today's statement.
It's hard to know what will stop the correction in the stock market, but we're pretty sure that robust economic data--growth, prices and/or wages--over the next few weeks would make things worse.
All the regional PMI and Fed business surveys we follow suggest that today's national ISM manufacturing report for November will be weaker than in October
Monthly core CPI prints of 0.3% are unusual; June's was the first since January 2018, so it requires investigation.
Small businesses remain extremely positive about the economy, but some of the post-election gloss appears to be wearing off. To be clear, the headline composite index of small business sentiment and activity in February, due this morning, will be much higher than immediately before the election, but a modest correction seems likely after January's 12- year high.
Having panicked at the January hourly earnings numbers, markets now seem to have decided that higher inflation might not be such a bad thing after all, and stocks rallied after both Wednesday's core CPI overshoot and yesterday's repeat performance in the PPI.
For the past six years, the PCE measure of core inflation has undershot the CPI version. The average spread between the two year-over-year rates since January 2011 has been 0.3 percentage points, and as far as we can tell most observers expect it to be little changed for the foreseeable future.
The falling unemployment rate and the threat it poses to the inflation outlook mean that the labor market numbers in the NFIB small business survey attract more attention than the other data in the report.
In the September forecasts, the median forecast of FOMC members for the long-term fed funds rate was 3.5%. Their long-term inflation forecast is 2%-- it has to be 2%, otherwise they would be forecasting permanent failure to meet their policy objectives -- implying a real rate of 1.5%. This is well below the long-run average; from 1960 through 2005, the real funds rate--the nominal rate less the rate of increase of the PCE deflator--averaged 2.4%.
The rate of growth of real personal incomes is under sustained downward pressure, slowing to 2.1% year-over-year in December from 3.4% in the year to December 2015. In January, we think real income growth will dip below 2%, thanks to the spike in the headline CPI, reported Wednesday. Our first chart shows that the 0.6% increase in the index likely will translate into a 0.5% jump in the PCE deflator, generating the first month-to-month decline in real incomes since January last year.
The acceleration in real consumption over the past year reflects the upturn in real after-tax income growth. This, in turn, is mostly a story of falling gasoline prices, which have depressed the PCE deflator. Gross nominal incomes before tax rose 4.2% year-over-year in the three months to September, exactly matching the pace in the three months to September 2014. But real income growth, after tax, accelerated to 3.3% from 2.5% over the same period, as our first chart shows.
The rate of increase of the financial services and insurance component of the PCE deflator has slowed from a recent peak of 5.8% in May 2014 to 3.3% in June this year. This matters, because it accounts for 8.4% of the core deflator, a much bigger weight than in the core CPI.
In one line: Core PCE deflator back on track; Q2 consumption headed for 3%.
In one line: Consumption rocketing; core PCE deflator returning to target on a quarterly annualized basis.
The 0.18% increase in the core PCE deflator in December was at the lower end of the range implied by the core CPI. It left the year-over-year rate at just 1.5%.
All eyes will be on the core PCE deflator data today, in the wake of the upside surprise in the January core CPI, reported last week. The numbers do not move perfectly together each month, but a 0.2% increase in the core deflator is a solid bet, with an outside chance of an outsized 0.3% jump.
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