The Fed’s preferred measure of inflation, the Personal Consumption Expenditure (PCE) Index grew by 3.9% in the 12 months ended May ’21, while Core PCE (excluding food & energy) came in slightly lower at 3.4%.
We still have to watch out for base effects, because of the low readings in May last year, but growth for the past 6 months is even higher, registering 5.3% (PCE) and 4.6% (core PCE) annualized gains.
Conclusion
Excluding temporary price spikes due to supply chain disruption, we expect inflation to average a minimum of 4.0% over the next three years.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.