The Fed's preferred inflation gauges are deflators of Personal Consumption Expenditures (PCE), the consumer spending component of GDP. These price indices are based on a few input data sources, including the Consumer Price Indices (CPI),Producer Price Indices (PPI), and Import Price Index (IPI), but are methodologically distinct from them. We usually have a decent read of PCE deflators after CPI (which tends to be the first inflation gauge released), but there are a lot of controls and calculations to account for. When updating views month to month about inflation, the dirty work here matters.
Core Cast
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Month-over-month core PCE came in at +32bps (vs +34bps nowcast) while the year-over-year core PCE reading came in at +3.09% (vs +3.12% nowcast). Overall, this print firms up the odds of a December hike. The upside we anticipated for airfares materialized. The smaller upside
Summary Following today’s PPI release, we are updating our nowcast by +2bps to +34bps m/m and by −1bp to 3.09% for the y/y September core PCE reading (a correction to the 3.12% y/y figure in our earlier email). We maintain our base case that
Summary Month-over-month core PCE came in at +25bps (vs 28bps nowcast) while the year-over-year core PCE reading came in at 3.01% (vs 3.14% nowcast). While headlines noted that today's reading were a downside miss, the month-over-month core PCE reading was
Summary Core PCE came in at +25bps for the month-over-month July reading, a highly uncharacteristic 9 basis point miss. Our miss primarily stemmed from healthcare, airfares, and tax preparation services. We will be implementing improved nowcasting techniques next month and look forward to being back on track. A