US PREVIEW: PCE Report Seen With Solid Inflation & Some Firmer Spending Pre-Iran

The personal income and outlays report for February is released at 0830ET today along with the third Q4 national accounts update and weekly jobless claims data. Whilst ‘stale’, it’s expected to show a continuation of core PCE inflation around 3% Y/Y as it remained stubbornly above target even prior to any potential spillover from the surge in energy prices in March. Real spending growth might have also firmed slightly after a subdued three months. 

• Core PCE inflation is expected to have increased 0.4% M/M in February with risk of rounding down to 0.3% M/M to extend a solid run after two months at 0.36% M/M (which could see a small upward revision to Jan and downward revision to Dec).
• Some unrounded estimates include GS 0.32, JPM 0.37, Nomura 0.37, MS 0.38, UBS 0.38 and DB 0.39.
• With the BEA still catching up on the release schedule after 2025 government shutdown disruption, March CPI will follow just a day later on Friday. Early analyst estimates have a median of 0.24% (range 0.23-0.34) for core PCE in March but with adjustments to be made after CPI and then PPI/import prices on Apr 14/15.
• Revisions aside, this tentative profile would see core PCE inflation inch lower to 2.99% Y/Y in Feb after 3.06% Y/Y in Jan before ticking up to 3.13% Y/Y in Mar. It first returned to a rounded 3.0% Y/Y rate in December for the first time since Feb 2025 having bottomed at 2.61% Y/Y in Apr 2025 in the interim.  
• On the activity side, nominal spending is expected to have been firm at 0.6% M/M in Feb after 0.4% M/M, seen translating to real spending rising 0.2% M/M after three months averaging a modest 0.1% M/M.
• Firmer nominal retail sales data have played a part in this expected profile, with overall sales up 0.6% M/M (cons at the time 0.5) and control up 0.45% M/M (cons 0.3).
• Strong start-of-year disposable income growth saw the savings ratio lift 0.5pts to 4.5% back in January for its highest since July but it's still low historically and set for a further decline judging by consensus for personal income growth of 0.3% M/M in Feb.