{"id":49252,"date":"2024-03-01T02:15:14","date_gmt":"2024-03-01T02:15:14","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=49252"},"modified":"2024-04-17T23:37:44","modified_gmt":"2024-04-17T23:37:44","slug":"core-pce-surprise-jump","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2024\/03\/01\/core-pce-surprise-jump\/","title":{"rendered":"Core PCE surprise jump"},"content":{"rendered":"

Monthly core PCE — the Fed’s favorite measure of underlying inflation — jumped by 0.416% or 5.0% annualized.<\/p>\n

\"Core<\/p>\n

Annual figures are still declining, including the Trimmed Mean PCE which declined to 3.2%.<\/p>\n

\"Core<\/p>\n

The 3-month (orange) and 6-month (gray) moving averages have turned upwards but not yet crossed the descending annual line (red).<\/p>\n

\"Core<\/p>\n

Services PCE — which tends to be the most persistent inflation — jumped even higher in January, reaching 0.596% or 7.2% annualized.<\/p>\n

\"Services<\/p>\n

The 3-month (yellow) and 6-month (gray) moving averages have crossed above the descending annual line (orange), warning of a trend reversal.<\/p>\n

\"Services<\/p>\n

The resilient US economy warns that the spike in January inflation may not be an anomaly. Financial conditions remain easy, with the Chicago Fed index at a low -0.518.<\/p>\n

\"Chicago<\/p>\n

Real personal disposable income per capita declined slightly in January but remains in an up-trend.<\/p>\n

\"Real<\/p>\n

Real retail sales are on trend.<\/p>\n

\"Real<\/p>\n

The labor market is tight, with job openings exceeding unemployment by close to 3 million.<\/p>\n

\"Job<\/p>\n

Container rail freight (blue) has been climbing since Q2 of last year.<\/p>\n

\"Rail<\/p>\n

Heavy truck sales rebounded in January after weakness in September-October last year.<\/p>\n

\"Heavy<\/p>\n

Gold<\/h2>\n

Gold jumped to $2044 per ounce on higher inflation expectations. Another test of $2060 is likely.<\/p>\n

\"Spot<\/p>\n

Conclusion<\/h2>\n

January core PCE warns that inflation is not dead and is likely to rebound in 2024. Easy financial conditions underpin a robust recovery, with a tight labor market, retail sales at trend, and signs of improving economic activity.<\/p>\n

The economy is likely to remain robust for as long as Treasury floods financial markets with liquidity — ahead of the November elections.<\/p>\n

A resurgence of inflation would increase pressure on the Fed to hold rates steady for longer. Further rate rises are unlikely — unless there is a massive spike in PCE inflation — but it is also possible that we don’t see rate cuts before the fourth quarter.<\/p>\n

Acknowledgements<\/h4>\n