- Prior was +2.8% y/y
- Core PCE 2.8% vs 2.8% expected
- Core m/m +0.2% vs +0.2% exp
- Unrounded core PCE +0.160% was vs +0.274% m/m prior
- Deflator +0.2% m/m vs +0.2% expected
- Unrounded +0.207% vs +0.238% m/m prior
Consumer spending and income for November :
- Personal income +0.3% vs +0.4% expected. Prior month +0.6%
- Personal spending +0.5% vs +0.5% expected. Prior month +0.4%
- Real personal spending +0.3% vs +0.1% prior
- Savings rate 3.5% vs 3.7% prior
This is a messy report because of data collection issues during the government shutdown. That’s forced the statisticians to use CPI data to synthesize some of the numbers, or to impute missing prices using the geometric mean of September and November CPIs to synthesize the October data.
Market moves on this report were muted but as the numbers are mostly in-line. I think with the shutdown problems, the whole data set is a bit tough to hang your hat on. At face value, the spending numbers are good for GDP and a positive sign for the economy but inflation continues to run well-above the Fed’s 2% target.
For background:
The Personal Consumption Expenditures (PCE) report is a monthly economic release from the U.S. Bureau of Economic Analysis (BEA) that tracks how much consumers spend on goods and services. It serves as a primary pillar of the U.S. economy, as consumer spending accounts for approximately two-thirds of domestic economic activity.
The report is most famous for its PCE Price Index, which the Federal Reserve considers its “gold standard” for measuring inflation. Unlike the more common Consumer Price Index (CPI), the PCE captures a broader scope of costs, including those paid on behalf of consumers (such as employer-provided healthcare). It also uses a “chain-type” formula that accounts for substitution behavior—if beef prices skyrocket and shoppers switch to chicken, the PCE reflects that shift, whereas the CPI often lags in doing so.
Investors and policymakers watch two versions: “Headline” PCE (or the deflator) and “Core” PCE, which excludes volatile food and energy prices to reveal long-term inflation trends.
This article was written by Adam Button at investinglive.com.