Analysts at Nomura expect a steady 0.2% (0.192%) m-o-m reading for July’s core PCE inflation report this week, bringing the y-o-y rate to 2.0% from 1.9% previously, consistent with Nomura’s view that core inflation will pick up only gradually.
Key Quotes
“In addition, we expect steady increases in both personal income and spending for July, highlighting firm economic momentum moving through Q3.”
“Finally, we expect some modest softening in the Chicago PMI business activity index as other August regional manufacturing surveys have deteriorated somewhat.”
“After incorporating developments last week, our Q3 GDP tracking estimate stands at 3.3% q-o-q saar with our Q2 tracking estimate at 4.0%.”
“Incoming data last week highlighted the continued deterioration of the housing sector as both existing and new home sales fell in July as affordability continues to decline. A weakening outlook for housing is probably contributing to downside risk seen by the FOMC in the August minutes of “the possibility of a significant weakening in the housing sector” and comes on the heels of disappointing housing starts data last week. Our housing outlook remains somewhat pessimistic because of worsening affordability driven in part by low inventory growth dampened by supply-side factors.”
“However, despite the weakness in housing indicators, the advance report in July durable goods orders showed resilient demand for core (non-defense excluding aircraft) durable goods, a good sign for economic momentum. While incoming data continue to suggest strong investment in business equipment, capital expenditure plan indices in many regional manufacturing surveys moderated in August.”
“The declines in these survey indices point to increased downside risk to equipment investment growth in the near term if trade risk continues to escalate.”
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