White House Advisor Comments on PCE Data

Interviewed by Bloomberg TV, White House Advisor Jared Bernstein commented on the US economic scene post the key inflation released on Friday. Asked whether Americans are back to soft landing talk? Bernstein said that the consensus among many was that the kind of stall and disinflation in Q1 of this year look like it was probably anomalous factors, some residual seasonality, and that “the prints for April whether for CPI or PCE, have been more on track”. Bernstein considers PCE print as very welcome news, but it’s just one month.

According to Bernstein, The Fed still needs more confidence in inflation-linked forecast, but the forces of disinflation that helped America so much in the second half of 2023, are still in place.
Bernstein also noted that markets got cooler data on Friday, coupled with a slowdown in consumer spending. Asked whether that actually constitutes a sign that further progress on inflation is going to have to mean a weaker US consumer, Bernstein answered “It’s really an important point because obviously so far, what we call the sacrifice ratio, meaning how much demand we’d had to give up to sacrifice to get the disinflation we’ve seen has been about zero.

Bernstein added: “I looked this morning at the report 4.4 percentage points of disinflation in the PCE, while the unemployment rate is virtually unchanged below 4% for over two years, and consumer spending is actually up over that period. So, the data tells you that much of the progress has been made on the economy supply side, it looks to me like the demand side is still quite intact, where we have a solid labour market supporting consumer spending”.

“We’ve seen some slowing, whether it’s GDP, whether it’s the number of job growth, but that slowing is down to rates that I would call more steady, more stable as the economy just normalizes after coming out of the pandemic in a 70% consumer spending economy if you have a really healthy labor market, which ours has been for over two years, and you have inflation coming down at a decent clip this morning, inflation down 60% off of its peak, that translates into real earnings feeds back into consumer spending”, said Bernstein.

Eventually, the White House advisor concluded his statement saying, “Now, look, I want to be clear, we’ve got a lot more work to do on the price side, prices are still too high and we have an aggressive cost cutting agenda that we’re going to continue to push. But the macro economy has been delivering solid numbers”.