A PCE of cake: Friday data roundup

Reuters

A PCE of cake: Friday data roundup

3:00 chiều giờ GMT, 27 Tháng 9 2024

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Dow gains ~0.9%, S&P 500 green, Nasdaq now ~flat

Energy leads S&P 500 sector gainers; Tech sole loser

Euro STOXX 600 index up ~0.5%

Dollar, gold lower; crude up; bitcoin up >2%

U.S. 10-Year Treasury yield edges down to ~3.78%

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A PCE OF CAKE: FRIDAY DATA ROUNDUP

Friday's economic data brought with it assurances that the Federal Reserve's jumbo 50 basis point rate cut last week was the right move, and likely caused more than a few economists to cast glances at the darkening clouds on the horizon.

The Commerce Department released its much anticipated and wide-ranging Personal Consumption Expenditures (PCE) report USPCE=ECI and it delivered nearly exactly what investors were hoping for, and tossed signs of a weakening economy as a bonus.

Starting with the price index, Powell & Co's pet inflation yardstick, the report shows headline and core measures (the latter excluding food and energy prices) both increased by 0.1% last month.

Year-over-year, headline and core prices increased by 2.2% and 2.7%, respectively.

These figures nailed expectations, and in the case of annual headline and monthly core, landed a hair cooler than analyst estimates.

The report supports the notion that "there is no need for interest rates to be so much higher than the rate of inflation," writes Clark Bellin, chief investment officer at Bellwether Wealth. "Friday's PCE report confirms that the Federal Reserve's deeper-than-expected 50 basis point cut last week was the right move, as keeping interest rates too high for too long can risk damaging the economy."

The PCE price index was the final piece in August's inflation puzzle, which shows major price growth measures approaching the Fed's 2% target:

It would seem everything is perfectly hunky dory, until we move to the report's other elements.

Personal income grew by 0.2%, half the pace predicted by economists, while personal consumption (the tentpole of the U.S. economy) slammed on the brakes, decelerating to 0.2% from 0.5% in July, and coming in below the 0.3% consensus.

"Personal income and spending were cooler than expected and that's another indication that the economy is slowing," Peter Cardillo, chief market economist at Spartan Capital Securities tells Reuters.

"That's good news for the markets in a way, and it basically indicates that the Fed is likely to continue to cut, perhaps by another 50 basis points by year-end,” Cardillo adds.

Digging deeper, consumers spent less on goods and more on services, with expenditures toward durable goods dipping 0.2%.

And while disposable income increased at the same pace of outlays, the saving rate dipped to 4.8%, the lowest it's been since December.

While a falling saving rate might be viewed as a sign of rising consumer optimism, could also be at least partly attributable to consumers simply having less money at the end of the month to put aside.

Speaking of the consumer, the University of Michigan (UMich) issued its final take on current-month consumer sentiment USUMSF=ECI, which was a tad sunnier than originally reported.

The index was revised 1.1 points higher, with survey respondents' assessment of current conditions and near-term expectations boosted by 0.6% and 1.9%, respectively.

"Sentiment appears to be building some momentum as consumers’ expectations for the economy brighten," says Joanne Hsu, director of UMich's consumer surveys. "At the same time, many consumers continue to report that their expectations hinge on the results of the upcoming election."

"Relative to August, consumers across political parties are increasingly expecting a Harris presidency," Hsu adds.

Here's UMich expectations and the PCE saving rate:

Near- and long-term inflation expectations held firm. Participants still expect 2.7% inflation a year from now (essentially saying it will be unchanged, if PCE is the yardstick), with five-year expectations at 3.1%.

To wrap things up, the Commerce Department also unveiled its advance takes on goods trade and wholesale inventories for August.

First, the gap between the value of goods imported to the U.S. and those exported abroad USGBAL=ECI narrowed by 8.3% to $94.26 billion.

Second, the value of merchandise stacked in the warehouses of U.S. wholesalers USAWIN=ECI increased by 0.2%, a deceleration from July's 0.3% growth.

Both metrics hint at a slowing - though still growing - current-quarter economy.

(Stephen Culp)

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