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Services Ex-Shelter Inflation Continues To Decelerate

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The December Personal Income and Spending numbers, including PCE deflators, came in nearly entirely in line with expectations though we did see modest lower revisions to prior for personal income and spending, and minor tweaks to prior price indices (higher for Oct, lower for Nov).

  • If anything, the % M/M unrounded core reading just below 0.3% (+0.296%) was slightly weak vs sell-side expectations of a figure in the low 0.3+% region.
  • Core PCE services ex-housing pulls back to 4.1% Y/Y in Dec from 4.3% in Nov and 4.7% in October, and vs the 4.9% peak in December 2021. (That's the Bloomberg index calculation; there is no "official" series, and we have seen other estimates vary slightly, but they are all telling the same story of decelerating price pressures in this core-core category eyed by the FOMC.)
  • This won't move the needle for the FOMC decision next Wednesday, as not only was the data in line with market expectations, but the PPI and CPI releases earlier in the month will have allowed the Fed to accurately estimate the PCE print.

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The December Personal Income and Spending numbers, including PCE deflators, came in nearly entirely in line with expectations though we did see modest lower revisions to prior for personal income and spending, and minor tweaks to prior price indices (higher for Oct, lower for Nov).

  • If anything, the % M/M unrounded core reading just below 0.3% (+0.296%) was slightly weak vs sell-side expectations of a figure in the low 0.3+% region.
  • Core PCE services ex-housing pulls back to 4.1% Y/Y in Dec from 4.3% in Nov and 4.7% in October, and vs the 4.9% peak in December 2021. (That's the Bloomberg index calculation; there is no "official" series, and we have seen other estimates vary slightly, but they are all telling the same story of decelerating price pressures in this core-core category eyed by the FOMC.)
  • This won't move the needle for the FOMC decision next Wednesday, as not only was the data in line with market expectations, but the PPI and CPI releases earlier in the month will have allowed the Fed to accurately estimate the PCE print.