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US DATA: Monthly Progress But Supercore Trend Still Hot

US DATA
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  • Core PCE inflation for November was marginally softer than detailed unrounded estimates, at 0.115% M/M vs estimates that we had seen averaging 0.13-0.14% M/M (it looked a larger miss compared to the 0.2% median estimate in the Bloomberg survey).
  • The minor upward revision seen in yesterday’s Q3 data came early in the quarter, back in Jul-Aug whilst small (0.01pp) downward revisions to Sep-Oct modestly added to today’s downward surprise.
  • It's the softest since May having averaged 0.215% M/M through Jun-Oct.
  • Sticking on a sequential basis, supercore PCE inflation printed 0.16% M/M in Nov and saw a similar revision profile (upward in Jul-Aug, downward in Sep-Oct). It’s the first month in line or softer than a 2% annualized pace since May, having averaged 0.27% through Jun-Oct.
  • Taking more of a step back, the annual rate of 2.82% Y/Y was technically its highest since April, but it still leaves it more clearly on track to average 2.8% in Q4 per the median FOMC forecast after this week’s upward revision from 2.6% in the September SEP.
  • Recent run rates are a little softer, with the three-month easing three tenths to 2.5% annualized and the six-month inching a tenth higher to 2.4% annualized.
  • Supercore PCE inflation remains problematic though, with an annual rate of 3.51% Y/Y and 3- and 6-mth rates of 3.2% and 3.0% annualized respectively. Unlike housing services, supercore averaged close to 2% pre-pandemic and so the category remains a missing piece of the return to inflation target puzzle.
  • Recall Powell on Wednesday: "We try to look at not just a couple or three months. We shouldn't - our position shouldn't change based on two or three months of good or bad data. We have a long string now of inflation coming down, gradually over time."
  • "That [12-month core PCE at 2.8% in their forecasts] is way better than we were. We still have work to do though is how we're looking at it. And we need policy to remain restrictive to get that work done, we think." Despite the upward FOMC revisions to 4Q25 core PCE inflation in particular, Powell considered it would still be “significant progress" and "meaningful" if core inflation drops to 2.5% in 2025 from 2.8 or 2.9% this year.
  • The latter gives an idea of how the FOMC is likely to view the recent run rates of circa 2.5% for core PCE inflation. 
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  • Core PCE inflation for November was marginally softer than detailed unrounded estimates, at 0.115% M/M vs estimates that we had seen averaging 0.13-0.14% M/M (it looked a larger miss compared to the 0.2% median estimate in the Bloomberg survey).
  • The minor upward revision seen in yesterday’s Q3 data came early in the quarter, back in Jul-Aug whilst small (0.01pp) downward revisions to Sep-Oct modestly added to today’s downward surprise.
  • It's the softest since May having averaged 0.215% M/M through Jun-Oct.
  • Sticking on a sequential basis, supercore PCE inflation printed 0.16% M/M in Nov and saw a similar revision profile (upward in Jul-Aug, downward in Sep-Oct). It’s the first month in line or softer than a 2% annualized pace since May, having averaged 0.27% through Jun-Oct.
  • Taking more of a step back, the annual rate of 2.82% Y/Y was technically its highest since April, but it still leaves it more clearly on track to average 2.8% in Q4 per the median FOMC forecast after this week’s upward revision from 2.6% in the September SEP.
  • Recent run rates are a little softer, with the three-month easing three tenths to 2.5% annualized and the six-month inching a tenth higher to 2.4% annualized.
  • Supercore PCE inflation remains problematic though, with an annual rate of 3.51% Y/Y and 3- and 6-mth rates of 3.2% and 3.0% annualized respectively. Unlike housing services, supercore averaged close to 2% pre-pandemic and so the category remains a missing piece of the return to inflation target puzzle.
  • Recall Powell on Wednesday: "We try to look at not just a couple or three months. We shouldn't - our position shouldn't change based on two or three months of good or bad data. We have a long string now of inflation coming down, gradually over time."
  • "That [12-month core PCE at 2.8% in their forecasts] is way better than we were. We still have work to do though is how we're looking at it. And we need policy to remain restrictive to get that work done, we think." Despite the upward FOMC revisions to 4Q25 core PCE inflation in particular, Powell considered it would still be “significant progress" and "meaningful" if core inflation drops to 2.5% in 2025 from 2.8 or 2.9% this year.
  • The latter gives an idea of how the FOMC is likely to view the recent run rates of circa 2.5% for core PCE inflation. 
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