US OUTLOOK/OPINION: Core PCE Inflation Seen Accelerating Again – 0830ET
Aug-29 11:53
- Released today at 0830ET, core PCE inflation is expected at 0.3% M/M, or an average of 0.28% M/M across analyst unrounded estimates after this month’s CPI, PPI and import price releases (ranging from 0.26-0.30).
- Assuming no revisions, that would follow the 0.26% M/M in June for a fourth consecutive monthly acceleration.
- Note that yesterday’s Q2 2nd release showed a small downward revision from 2.54% to 2.47% annualized, although quarterly revisions have tended to land earlier in the quarter. We don’t expect this to have had an impact on July estimates.
- We think a 0.28% M/M increase would see the Y/Y rate at 2.9% (matching Bloomberg consensus) although it could come close to rounding down to 2.8% on account of those mild revisions. It was 2.8% Y/Y in June and has recently bottomed at 2.6% Y/Y in Jun 2024 and Apr 2025.
- As for other metrics, supercore PCE was at a somewhat measured 0.19% M/M in June although a still robust 3.2% Y/Y, whilst market-based services were stronger at 0.27% M/M and 3.3% Y/Y.
- Recall that Chicago Fed’s Goolsbee (’25 voter), one of the most dovish members on the FOMC, said on Aug 21 that he thought the rise in services inflation is a “dangerous” data point that he hopes is just a blip.
- The activity data meanwhile will provide a useful update on consumer momentum early in Q3. Bloomberg consensus currently points to a 0.3% M/M increase in real spending after 0.1% M/M in June, helped by a solid (nominal) retail sales report that also included upward revisions.
- Yesterday’s Q2 GDP revisions saw personal consumption revised up from 1.4% to 1.6% as expected after 0.5% in Q1 and an average 3.1% through 2024.
- Income growth has been playing a strong role in recent months and is expected to continue to do so, seen rising 0.4% M/M after 0.3% M/M. With nominal spending growth penciled in at 0.5%, it should see only a minor decline in the saving ratio depending on deductions.
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