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US: The Macro Week Ahead: 2nd Q4 GDP and January PCE Reports

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Next week's US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. 

  • Additionally, regional/consumer surveys will receive more attention than usual given the deterioration seen in the February reports we've seen so far: the schedule includes regional Feds (services/nonmanuf includes Dallas Fed, Philly; manufacturing includes Dallas, Richmond, KC), Conference Board Consumer Confidence, and MNI Chicago PMI.
  • GDP: Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3. Much of the relative GDP weakness in Q4 after two quarters averaging 3.0% came from a large drag from inventories. It should continue to show signs of robust domestic demand after personal consumption increased 4.2% annualized in the advance release.
  • PCE: However, January’s monthly report is likely to show consumption got off to a much weaker start of 2025. Recall that retail sales were far weaker than expected in January as they slid -0.9% M/M (cons -0.2) along with an even larger miss for the control group at -0.8% M/M (cons 0.3) to more than unwind the previously strong 0.8% M/M increase in December. Early days for the Bloomberg consensus currently see real personal spending growth of -0.1% M/M in Jan after 0.4% in Dec.
  • As for inflation, Governor Waller cited estimates for core PCE inflation of around 0.25% M/M and it likely rounding to 2.6% Y/Y with some help from modest upward revisions. Base effects will have helped it drop from the 2.8% Y/Y averaged in Q4 whilst recent run rates should look a little more favorable (2.1% and 2.4% annualized over three and six months assuming no revisions). 

  • Note that revisions will go back to Q4, reflecting the new seasonal adjustment factors for both CPI and PPI, but longer dated revisions will have to wait for the comprehensive national account revisions due in September.

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Next week's US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. 

  • Additionally, regional/consumer surveys will receive more attention than usual given the deterioration seen in the February reports we've seen so far: the schedule includes regional Feds (services/nonmanuf includes Dallas Fed, Philly; manufacturing includes Dallas, Richmond, KC), Conference Board Consumer Confidence, and MNI Chicago PMI.
  • GDP: Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3. Much of the relative GDP weakness in Q4 after two quarters averaging 3.0% came from a large drag from inventories. It should continue to show signs of robust domestic demand after personal consumption increased 4.2% annualized in the advance release.
  • PCE: However, January’s monthly report is likely to show consumption got off to a much weaker start of 2025. Recall that retail sales were far weaker than expected in January as they slid -0.9% M/M (cons -0.2) along with an even larger miss for the control group at -0.8% M/M (cons 0.3) to more than unwind the previously strong 0.8% M/M increase in December. Early days for the Bloomberg consensus currently see real personal spending growth of -0.1% M/M in Jan after 0.4% in Dec.
  • As for inflation, Governor Waller cited estimates for core PCE inflation of around 0.25% M/M and it likely rounding to 2.6% Y/Y with some help from modest upward revisions. Base effects will have helped it drop from the 2.8% Y/Y averaged in Q4 whilst recent run rates should look a little more favorable (2.1% and 2.4% annualized over three and six months assuming no revisions). 

  • Note that revisions will go back to Q4, reflecting the new seasonal adjustment factors for both CPI and PPI, but longer dated revisions will have to wait for the comprehensive national account revisions due in September.

Keep reading...Show less