Core PCE inflation tracking below target despite resilient economic growth ahead of a key payrolls report
MNI (LONDON) - Executive Summary
- GDP growth has proved surprisingly resilient, both after comprehensive revisions and with latest tracking for Q3, whilst GDI was revised massively higher towards GDP growth rather than the two converging.
- Initial jobless claims surprised lower with their four-week average falling to its lowest since late May, but the Conference Board’s labor differential poses increasingly notable upside risks to the unemployment rate.
- Core inflation at 0.13% M/M in August appeared lower than median consensus of 0.2 but unrounded analyst estimates had averaged 0.16% and Fed Governor Waller had anticipated 0.14%. An unconventional four-month window that Waller explicitly referenced sees core PCE below target at 1.8% annualized and supercore at a favorable 2.1%.
- The data maintain a low bar for further front-loading of the Fed’s cutting cycle if there are dovish surprises from next week’s labor data and the nonfarm payrolls report in particular.
- Fed Chair Powell will also speak on Monday in an event that now includes prepared remarks before a Q&A although there hasn’t been much top tier data since his FOMC press conference.
- Fed Funds futures price 39bp of cuts for Nov 7 and 77bp of cuts over the Nov and Dec meetings combined. Friday’s payrolls report is firmly in mind although the October report will also land ahead of the decision, as will of the course the US presidential election.
PLEASE FIND THE FULL REPORT HERE: US week in macro_240927.pdf
231 words