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US DATA: No Surprises In Core PCE, Recent Progress But Supercore Still Stubborn

US DATA
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  • There weren’t any major surprises in the December core PCE inflation data, printing 0.156% M/M for only fractionally under the 0.18% average of unrounded estimates we’d seen prior.
  • It followed offsetting minor revisions to November (0.108% M/M) and October (0.273% M/M).
  • It saw Y/Y inflation at 2.79% Y/Y in December to average the 2.8% in Q4 seen in yesterday’s quarterly advance for exactly in line with the median FOMC revision from the December SEP (which had been revised up from 2.6% back in Sept).
  • There are well known base effects pushing these Y/Y rates higher, whilst short-term trend rates continue to look more favorable: the three-month eased from 2.6% to 2.2% annualized (lowest since July) whilst the six-month eased a tenth to 2.3% (lowest since Sept and before that Dec 2023).
  • Within the details, core services ex-housing shows less sign of recent moderation.
  • This "supercore" increased a solid 0.28% M/M, which helped see an unchanged Y/Y pace at 3.5% Y/Y, for a third month running at highs since April, whilst three- and six-month rates were broadly unchanged at 3.2% and 3.1% annualized respectively.
  • When thinking about the return to pre-pandemic averages consistent with the inflation target, these supercore rates continue to run hot compared to the 2.0% averaged in 2019 or 2.2% in 2017-19. 
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  • There weren’t any major surprises in the December core PCE inflation data, printing 0.156% M/M for only fractionally under the 0.18% average of unrounded estimates we’d seen prior.
  • It followed offsetting minor revisions to November (0.108% M/M) and October (0.273% M/M).
  • It saw Y/Y inflation at 2.79% Y/Y in December to average the 2.8% in Q4 seen in yesterday’s quarterly advance for exactly in line with the median FOMC revision from the December SEP (which had been revised up from 2.6% back in Sept).
  • There are well known base effects pushing these Y/Y rates higher, whilst short-term trend rates continue to look more favorable: the three-month eased from 2.6% to 2.2% annualized (lowest since July) whilst the six-month eased a tenth to 2.3% (lowest since Sept and before that Dec 2023).
  • Within the details, core services ex-housing shows less sign of recent moderation.
  • This "supercore" increased a solid 0.28% M/M, which helped see an unchanged Y/Y pace at 3.5% Y/Y, for a third month running at highs since April, whilst three- and six-month rates were broadly unchanged at 3.2% and 3.1% annualized respectively.
  • When thinking about the return to pre-pandemic averages consistent with the inflation target, these supercore rates continue to run hot compared to the 2.0% averaged in 2019 or 2.2% in 2017-19. 
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