Analysts at Nomura point out that the US core PCE price index increased somewhat stronger than expected in May, rising 0.213% m-o-m compared with Nomura’s forecast of 0.156% m-o-m (Consensus: 0.2%).
Key Quotes
“Most of the upside miss was attributable to hospital services prices which increased slightly by 0.1% m-o-m despite PPI’s corresponding index, an input into PCE price estimation, declining sharply.”
“That said, the stronger-than-expected core PCE inflation pushed up its 12-month change to 2.0% (1.955%) on a rounded basis (Nomura: +1.888%, Consensus: +1.9%), marking the highest reading since April 2012.”
“Underlying trend of personal spending remained solid in May
Personal income rose 0.4% m-o-m in May, matching expectations, with a steady 0.3% gain in wages and salaries. The saving rate increased to 3.2% in May from 3.0% in April as spending slowed in the month.
Personal spending was mixed, rising only a modest 0.2% m-o-m in May, below expectations (Nomura: 0.5%, Consensus: 0.4%). Moreover, April spending was revised down to a 0.5% increase (previously reported as a 0.6% gain).”
“While trade-related uncertainty appears to have weighed on sentiment, consumer confidence remains firm. The final estimate of the University of Michigan consumer confidence index for June came in at 98.2, up slightly from 98.0 in the previous month. The report suggests that while households remain upbeat, they are concerned about the effects of trade tensions on prices and economic conditions.”
“GDP tracking update: Real personal spending on energy goods and services was much weaker than we expected in May. Further, stronger-than-expected core PCE inflation implies slower Q2 real PCE growth. Thus, we lowered our Q2 real GDP tracking estimate by 0.3pp to 4.6% q-o-q saar from 4.9%, previously.”
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