US OUTLOOK/OPINION: Wide Range To Core PCE Estimates, PPI Portfolio Mgmt Watched
Jun-12 10:04
- There remains a wide range of estimates for core PCE inflation in May (0.11-0.35% M/M across analysts below, after 0.12% M/M in April) following yesterday’s CPI release.
- Today’s PPI release is likely to see a sizeable narrowing in this range. There are many, mostly services-related, components that feed into core PCE but we expect most attention this month on portfolio management & investment advice after its -6.6% M/M drop dragged circa -0.12pps from core PCE in April.
- The S&P 500 increased 8.2% M/M in May when looking at monthly averages after -5.5% in April and -5.9% in March but the lags at which these moves filter into the PPI category are uncertain.
- This category is also prone to large revisions (on the subject of which, February's 7.0% M/M jump still looks out of kilter with market moves).
Analyst estimates for % M/M core PCE inflation.
- BNP Paribas: 0.11% - assuming an 8bp drag from portfolio mgmt owing to 1-mth lag to S&P 500. [we estimate that 8 looking for a circa -4.5%]
- TD Securities: 0.16%
- Goldman Sachs: 0.18%
- JPMorgan: 0.19%
- BofA: 0.18-0.24%
- Nomura: 0.35% - eyeing portfolio mgmt & invt advice +4.4% after -6.6%
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EUROPEAN FISCAL: Austria Forecasts Continued Maastricht Breaches
May-13 10:02
Austria targets budget gaps of 4.5% and 4.2% of GDP in 2025/26 and plans to reach the EU's 3% of GDP budget gap target only in 2028 according to media reports on today's press conference of Austria's finance minister Marterbauer.
- That keeps to the 4.5% GDP for 2025 the Finance Ministry had indicated back on Apr 17, following the Fiscal Council on Apr 11 forecasting deficits of 4.4% GDP in 2025 before 4.1% GDP in 2026.
- Whilst not new compared to those updates, it's still a sizeable deterioration from 2025 deficit estimates in the range of 3.3-3.8% GDP as recently as Apr 3.
- "Lower government spending and higher taxes will undoubtedly slow down economic development [...] That is why we are proceeding cautiously and choosing our steps carefully", Marterbauer adds.
- Savings measures to bring down the budget deficit include an elevated levy on banks and energy companies, part of €6.4 billion in budget balancing steps this year, Bloomberg commented.
- Austria exceeded the Maastricht limit of 3% in 2024 at 4.7% of GDP, a significant widening from 2.6% of GDP in 2023 ('EUROPEAN FISCAL: Austria Deficit Exceeds Maastricht Limit But Sanctions Unlikely' - MNI, April 3).
- The Bund/RAGB spread trades little changed following today's announcement at 39.4bp (-0.5bp on the day), indicating the lack of surprise having drifted higher than other European countries from the second half of March. The spread to bunds is still low by other country standards.
BOE: Pill: Remain concerned about structural change in price and wage behaviour
May-13 10:01
- Pill was asked in the Q&A for his speech about whether the MPR forecasts could be used as an endorsement of market rates. He replied that is a "logical set of conclusions" but that "both individual members of the MPC and the collective view of the MPC have looked at things beyond that forecast."
- "I remain concerned that we have seen a sort of structural change in price and wage bevaiour, may be driven by the type of things that were embodied in the models... from the 70s and 80s.... due to real income resistance, both in the entrepreneurial sector...and in the labour sector in terms of wages... if you believe that, not only does that mean inflation, it would mean, in response to new shock, it may be more and it may mean that the response ensure that we get back to our target within a reasonable time needs to be somewhat more aggressive."
US NFIB APR SMALL BUSINESS INDEX 95.8
May-13 10:00
- US NFIB APR SMALL BUSINESS INDEX 95.8
