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PPI Details Pose No Apparent Upside Risk To Core PCE Estimates (1/2)


December's PPI report produced a downside surprise in terms of headline (-0.1% M/M vs +0.1% expected, and vs a -0.1% Nov figure that includes a downward 0.1pp revision), with ex-food/energy also soft (0.0% vs 0.2% expected, 0.0% prior).

  • The ex-food/energy/trade metric was in line though, accelerating to a 3-month high 0.2% from 0.1% prior as expected.
  • The most scrutinized areas though will be those that feed into the Fed's preferred measure of inflation: PCE.
  • On this front there is no reason from this report to expect any upside revisions to those expectations than had been imputed by analysts after yesterday's CPI, and perhaps some bias toward downward revisions if anything - especially based on what was reported for the key healthcare services categories.
  • Recall that sell-side analyst expectations for core PCE ranged from 0.12-0.15% M/M (BofA) to as high as 0.28 (Citi)-0.3% (unrounded, Wrightson ICAP) post-CPI yesterday.

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