PCE Preview: Forecasts by seven major banks, inflationary pressure still high

The US Bureau of Economic Analysis (BEA) will release the Core Personal Consumption Expenditure (PCE), the favoured inflation gauge of the Fed, on Friday, March 29 at 12:30 GMT. As the release date approaches, the following are the projections from academics and economists at seven major banks.

It is expected that the US core PCE Price Index would stay constant at 2.8% annually. Forecasts for the monthly underlying inflation figures indicate a 0.3% increase, decelerating from the 0.4% increase observed in January.

SocGen

The PCE deflator is the major emphasis, and both the headline and the core are expected to rise by 0.3%. This is consistent with the Consumer Price Index’s (CPI) 0.4% increase. Unlike the CPI, the PCE deflator measures costs for goods and services actually consumed as opposed to household spending. The costs of financial transactions must be deduced because they are implicit. The two main areas of distinction are healthcare and financial costs, which are usually paid for by the government or businesses. Based on the February PCE data, we expect a little increase in healthcare costs. Nonetheless, we anticipate a significant rise in monetary expenses. We update the weightings to forecast a 0.3% increase in each of the other categories based on changes in the CPI price.

Commerzbank

For the MoM rate, we anticipate a rate of 0.4%, or 0.3% if energy and food are excluded (core rate). Furthermore, there’s a good chance that the data from earlier months will be somewhat updated. As a result, the core rates for January (0.4%) and December (0.1%) could be rounded to the closest tenth. In any event, the numbers probably indicate that inflation is still persistently high and has even accelerated lately. When expressed in terms of the core rate, prices most likely increased by 2.8% year over year.

ING

Although not ideal, a 0.3% result is widely supported by the consensus given the CPI and PPI figures that have already been made public. Thin market circumstances could result in disproportionate market movements in response to any data surprise, since this is released on Good Friday, when a lot of workplaces will be closed. Additionally, the report might indicate that actual consumer spending has had its second consecutive negative MoM reading.


TDS

Although noticeably less than January’s 0.42% increase, the February CPI/PPI statistics still show strong increases, which could lead to a solid 0.28% MoM gain for the core PCE. It’s also possible that the PCE’s supercore slowed down to a more controllable gain of 0.25%.

NBF

The annual core PCE deflator may have progressed 0.3% MoM in February, a result which should leave the 12-month rate unchanged at a 35-month low of 2.8%.

CIBC

The Fed’s preferred inflation gauge, core PCE, should come in hot for the second month in a row at 0.3% MoM. Headline PCE prices should rise by 0.4%.

Citi

Core PCE inflation should rise 0.26% MoM, rounding to 0.3% but with a chance of a somewhat softer print that rounds to 0.2%. Likely upward revisions to last month’s data should mean year-on-year core PCE is revised higher to 2.9% in January and moderates only to 2.8% YoY in February. Details of February core PCE, however, should be less concerning for Fed officials following substantial strength in services inflation in January. Core goods prices, which rose 0.1% MoM in February CPI, should rise 0.26% in February but core services prices excluding housing should rise a more modest 0.21%.