The Fed’s favorite measure of inflation, US core PCE came in at 4.9% YoY as expected, down from 5.2% YoY the previous month and inspiring those calling for peak inflation. The inflation numbers are coming off levels not seen for 40 years. Rising energy prices continue to be a key factor driving inflation and global oil and natural gas prices have been moving steadily higher following Russia’s invasion of Ukraine, which could disrupt supply. Personal income rose 0.4% but personal spending rose 0.9% as inflation takes its toll leading to the savings rate falling to 4.4%, the lowest since 2008
The PCE price index is closely watched since it is the preferred inflation measure of the Federal Reserve, which has begun raising interest rates last month for the first time since the pandemic began to tamp down rising prices.
Highlights
PCE for April:
- PCE core (ex food and energy) YoY 4.9% YoY as expected, down from 5.2% YoY the previous month
- PCE core (ex food and energy) MoM 0.3% as expected, Prior MoM core 0.9%
- Headline PCE YoY 6.3% vs 6.6% last month
- Headline PCE MoM 0.2% vs 0.9% last month
The market seems to go through phases of trading on the premise that the US is at or close to, peak inflation. The shock will come if better inflation news in coming months is not coming.
Consumer spending and income for April:
- personal income 0.4% vs. 0.5% estimate
- personal spending 0.9% vs 0.7% estimate
- savings rate fell to 4.4%. That is the lowest since 2008
US Personal Spending
US Personal Income
Savings
The personal savings rate as a percentage of disposable personal income
“The average amount of personal savings dropped 15% from $73,100 in 2021 to $62,086 in 2022, according to Northwestern Mutual’s recent 2022 Planning & Progress study. And 60% of U.S. adults say that the pandemic has been ‘highly disruptive’ to their finances. The annual study was conducted by The Harris Poll between Feb. 8 and Feb. 17 of this year, with data pulled from responses from 2,381 American adults.” May 21 – CNBC (Nicolas Vega):
“Some investors may be grappling with the sting of higher-than-expected capital gains for 2021 and losses in 2022. But experts say tax-planning opportunities may soften the blow. Individuals paid significantly more taxes this season, and the surge in capital gains in 2021 may be to blame, according to an analysis from the Penn Wharton Budget Model. Adjusted for inflation, filers paid more than $500 billion in April 2022, compared to north of $300 billion in the years before the pandemic…” May 25 – CNBC (Kate Dore):
Source: US Bureau of Economics
From The TradersCommunity News Desk