US OUTLOOK/OPINION: Monthly Core PCE To Slow Abruptly After Large Revision [2/2]
Apr-30 09:46
Core PCE Should Slow Abruptly After Strong Revision [2/2]
- The monthly PCE report for March (1000ET) should give a better idea of consumption momentum heading into Q2.
- Real personal spending is seen rising 0.5% M/M after 0.1% in Feb and a weak -0.6% M/M in Jan that in turn followed two strong months averaging 0.5% in Nov-Dec.
- Retail sales surged (a nominal) 1.4% M/M in March after 0.0% although the control group has seen a different profile with 0.4% M/M after 1.0%.
- On the inflation side, Bloomberg consensus has core PCE inflation at 3.1% annualized in Q1 (released at 0830ET) after 2.64% in Q4. Trying to get a read on what it implies for March (1000ET) will be more difficult than usual as there should have been a large upward revision to February judging by PPI details earlier this month.
- Specifically, core PCE inflation is seen at a ‘low’ 0.1% M/M in March, with unrounded analyst estimates seen averaging 0.07% M/M.
- However, the already strong 0.365% M/M in Feb has a good chance of being revised up to the cusp of 0.4-0.5% M/M following a particularly large upward revision to portfolio management fees (which is likely due a correction either in March (next revision) or April (new data)).
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EUROPEAN INFLATION: MNI Projects 2.2% Y/Y German National CPI, Core 2.6%
Mar-31 09:44
From state-level index data that equates to 89.1% weighting of the national February flash German CPI print (due at 13:00 GMT / 14:00 CET), MNI estimates that national CPI (non-HICP print) rose by 0.3-0.4% M/M (Feb 0.4%) and rose 2.2-2.3% Y/Y (Feb 2.3%). See the tables below for full calculations.
- Analyst consensus stands at 2.2% Y/Y and 0.3-0.4% M/M, so the release appears to come in inline.
- Current tracking of core CPI (ex-energy and food, based on 50% of the national index) implies around 2.6% Y/Y (2.7% in Feb) and 0.6% M/M (0.3% Feb).
- We will provide a follow-up bullet looking at underlying drivers in due course.
- Note: These estimates are in relation to the national CPI print, not the HICP print which feeds into the Eurozone HICP print that the ECB targets. The magnitude of surprises to consensus can sometimes be different due to the different methodologies and weights used in national CPI vs HICP - but the direction of the surprise is normally the same.
| Y/Y | March (Reported) | February (Reported) | Difference |
| North Rhine Westphalia | 1.9 | 1.9 | 0.0 |
| Hesse | 2.4 | 2.3 | 0.1 |
| Bavaria | 2.3 | 2.4 | -0.1 |
| Brandenburg | 2.3 | 2.3 | 0.0 |
| Baden Wuert. | 2.2 | 2.5 | -0.3 |
| Berlin | 1.9 | 2.0 | -0.1 |
| Saxony | 2.5 | 2.3 | 0.2 |
| Rhineland-Palatinate | 2.0 | 2.4 | -0.4 |
| Lower Saxony | 2.4 | 2.5 | -0.1 |
| Saarland | 2.0 | 2.4 | -0.4 |
| Saxony-Anhalt | 2.9 | 3.0 | -0.1 |
| Weighted average: | 2.22% | for | 89.1% |
| M/M | March (Reported) | February (Reported) | Difference |
| North Rhine Westphalia | 0.3 | 0.4 | -0.1 |
| Hesse | 0.4 | 0.3 | 0.1 |
| Bavaria | 0.3 | 0.4 | -0.1 |
| Brandenburg | 0.4 | 0.6 | -0.2 |
| Baden Wuert. | 0.2 | 0.5 | -0.3 |
| Berlin | 0.6 | 0.4 | 0.2 |
| Saxony | 0.6 | 0.3 | 0.3 |
| Rhineland-Palatinate | 0.2 | 0.2 | 0.0 |
| Lower Saxony | 0.3 | 0.4 | -0.1 |
| Saarland | 0.2 | 0.3 | -0.1 |
| Saxony-Anhalt | 0.7 | 0.5 | 0.2 |
| Weighted average: | 0.36% | for | 89.1% |
US TSYS: 10s Stabilise Around 4.20%, March Yield Lows Unchallenged
Mar-31 09:40
10-Year Tsy yields stabilise around 4.20%, ~10bp off the March low (4.104%) and a couple of bp off session lows.
- TY futures back to 111-17+ vs. session highs of 111-22+. Resistance at the March 20 high (111-17+) pierced, with bulls now looking to force a break above the March 11 high (111-25) as they aim to build further on last week’s gains. The medium-term trend condition is the contract is bullish.
- U.S. reaction to the risk-off price action seen in Asia & the London morning now eyed.
AUD: Most Recent Analyst Views
Mar-31 09:33
- *ING note that AUD & NZD have been the big losers in the G10 in the second half of March as pressure from Chinese yuan proxy trades intensified. They don’t see much respite in sight given their relatively pessimistic view on the US trade policy to be rolled out in April. ING are still targeting a move to 0.62 in AUDUSD before they can think about calling for the bottom.
- *TD Securities maintain their bias to position for steeper curves and a weaker AUD with "Liberation Day" likely to overshadow the RBA meeting.
- *JP Morgan engages in EURAUD downside this week to tactically trade relative tariff exposure. Encouragingly, AUD screens more favourably on their FX quant TEAMS model with the currency buoyed by its forecast revision and activity surprise index scores keeping its ranking relatively firm.
- *Goldman Sachs believe markets continue to look more vulnerable to a downside surprise to the US outlook than an upside one. GS say the weaker momentum in the soft indicators and broadly lower sentiment raises the odds that the hard data begins to follow suit. The miss in personal spending adds to that case and increases the likelihood that markets view tariffs as most negative for the US. For that reason, GS continue to have a bias towards lower longer-end yields and equities—and they stick with their open trade recommendation to short AUD/JPY with a target of 90.5.
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