US OUTLOOK/OPINION: Core PCE Tracking Raises Likelihood Of Lower FOMC Forecast
Nov-26 11:11
- Updating latest core PCE estimates for September after yesterday’s PPI report, we now track a median of 0.22% M/M vs 0.25% pre-PPI and closer to 0.30% pre-CPI.
- This September release won’t come until Friday, Dec 5. There seems to be some confusion over the October PCE report, originally scheduled for today, but it’s currently without a release date and we’re not sure how it can be calculated if BLS isn’t publishing an October CPI report.
- A range of core PCE estimates: 0.20 (JPM), 0.21% (Nomura and TD Securities), 0.22% (GS), 0.23% (Barclays and MS).
- These estimates point to a similar pace to the 0.23% M/M in August as well as the 0.24% averaged through May-July. Morgan Stanley see scope for a +1bp revision to Aug and +1.5bp for Jul.
- Assuming no revisions for simplicity here, a 0.22% M/M increase would continue to imply an above target run rate at 2.8% annualized in latest three months or 2.85% Y/Y, although it would help stop any further increases in the Y/Y after 2.9% in Aug. It starts to make it more likely we’ll see downward revisions to the FOMC median core PCE forecast of 3.1% Y/Y in 4Q25 with next month’s revised SEP.
- As for more detailed estimates, core services ex-housing (supercore) inflation is seen at 0.26% M/M by Nomura and 0.28% by MS for a still robust pace after the 0.33% averaged in Jul-Aug.
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UK FISCAL: "Mansion tax" plans - and alternative council tax bandings
Oct-27 11:01
- The Mail on Sunday (link here) reports that a "mansion tax" is under consideration. This is said to be set at an annual levy of 1% for the amount that a property price exceeds GBP2mln. So a GBP2.5mln property would have a GBP5k annual charge, a GBP5mln property a GBP30k annual charge etc.
- The advantage to this over other wealth taxes is that property wealth is difficult to hide and cannot move out of the country.
- The obvious disadvantage is that this has implications on the housing market and pushes house prices down (and more widely distorts the housing market).
- There are also large regional variations - so a GBP2mln property in London may not be seen as a "mansion" in a lot of people's eyes - whereas a GBP2mln property in rural Wales of Scotland would be seen very differently.
- It is also very difficult to accurately price these properties - one of the reasons that council tax is currently conducted in bands.
- Amongst the critics are former BOE Governor, Lord King who has said that the government lacks a "coherent strategy" on the economy (Sky News).
- Alternatives to the plan include adding more bands to council tax (on top of the current A to H). And have the top bands pay a vastly increased rate. However, this would then be collected by councils rather than via the Treasury - and would therefore require further council redistribution. This would, however, reduce the need for frequent revaluations.
- The IFS has previously estimated that introducing a council tax band which was 12x band A would raise GBP3.6bln. We haven't seen any explicit costings for the new mansion tax plans.
