These figures confirm the concern of the fed that the underlying value pressure – the boycott of food and energy – remains continuously. The core PCE figure is now close to 3% for several months, which is far above the 2% inflation target of the Central Bank.
Personal income and spending adds concerns of data inflation
With inflation print, personal income increased by 0.4% in August, slightly defeated the forecast of 0.3%. Personal expenses also increased 0.6%, stronger than 0.5% estimate. Optic in consumption, especially in services, continuous value supports viscosity and gains weight in the alert stance of the fed.
Spending joint power with stubborn core inflation suggests that the demand is still quite flexible that to slow down the progression of disintegration, especially in labor-intensive areas. With only 0.1%increase in actual disposable income, home income is more aggressively spent than an increase.
Stick up service inflation boundary fed policy flexibility
While the prices of goods have softened, the inflation of the service sector continues to keep the core index high. This reflects comprehensive wage growth and strong demand for healthcare, housing and financial services. The fed remains as a sign on this core metric, when he can easily consider the policy, and Friday’s data provides little justification for the close period axis.
Markets are now pricing in more extended stagnation, traders have carried forward expectations for the first rate as inflation proves to be slow to withdraw from expectation.
Outlook: Recession for Bond, Mixed for USD, helpful for equity
The core inflation stuck at 2.9% and to spend the remaining strong, the Fed is likely to maintain its restrictive stance. This is a recession for the treasure, especially at the front end, because yield compression expectations are easily. The US dollar response can be mute given in view of in-line data, but equity can get minor support from the ongoing consumer flexibility and the absence of Hawkish surprise.
