It's All in the Numbers
On Friday, PCE data, a measure used by the Fed for its target, was broadly in-line with expectations. The PCE deflator rose 0.3%mom and 2.5%yoy (up from 2.4%yoy in February), and the PCE core deflator prints came in at 0.4%mom and 2.8%yoy (from 2.9% previously). Energy was a larger driver of the headline figure, having risen 3.4%, thus pushing up goods prices (+0.5%). Recreational goods, vehicles, clothing and footwear also showed robust increases. However, prices for furnishings and household equipment were lacklustre.
Other data showed that the driver of growth, i.e., the consumer remains strong; personal spending surprised to the upside in February. However, personal income missed expectations.
The Fed’s Chair Powell said policymakers were pleased that the PCE data was in-line with expectations, adding that the path to the 2% target is “sometimes bumpy”. Powell later reiterated that the US economy remains strong adding that there is no need to rush to cut. Powell also noted that the central bank’s base case is for inflation to trend lower, however, rates could be held higher-for-longer if not.
Yesterday the US ISM manufacturing unexpectedly rose to 50.3 in March (from 47.8 in February), jumping into expansionary territory, for the first time since September 2022. The prices paid component notably picked-up, from 52.8 in February to 55.8 in March, creating a stir for markets focused on inflation. The dollar and US equities charged higher, while UST yields sold-off. ISM new orders also moved into expansion, while the employment component remained below the 50 level, at 47.4.
Futures markets are still pricing in a chance of a rate cut in June, ahead of which there will be plenty of inflation and jobs data to digest.
This week’s employment data will no doubt keep markets on their toes. Currently, forecasts show +203k jobs were added in March, unemployment picked-up marginally to 3.8%, and average hourly earnings eased to 4.1%yoy.
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