Newsquawk Primer: Core PCE due Thursday February 29th at 13:30 GMT / 08:30 EST.

Analysis details (12:20)

Prices: Core PCE for January, the Fed's preferred gauge of inflation, will be released on Thursday, 29th February at 08:30ET. The report will be key as it will be used to confirm the hot inflationary narrative seen from the other January inflation data. Following the hot CPI, PPI, and US import prices, many analysts ramped up their PCE forecasts. The street expects Core PCE to rise 0.4% M/M (f/c range of 0.1-0.4%), accelerating from December's 0.2%, with the Y/Y seen easing to 2.8% (f/c range of 2.6-2.9%) from 2.9%. Meanwhile, headline PCE is seen at 0.3% M/M (prev. 0.2%; f/c range 0.2-0.4%) and 2.4% Y/Y (prev. 2.6%; f/c range of 2.2-2.7%). The super core metrics, which are considered to be levered to wage pressures, will also be closely watched. In the January CPI release, services ex-housing saw a notable rise, and further pressure in the January PCE figures will add to the rise already seen in December, where Core PCE services prices ex-housing M/M rose to 0.3% from 0.1%. 

Consumer: Also within the report, Personal Income is expected to rise by 0.4% in January from 0.3% in December with consumption seen easing to 0.2% from 0.7%; real consumption is expected to decline by 0.1%. The downbeat consumption metrics would be in fitting with the soft January Retail Sales report. Meanwhile, major retail earnings have seen both Home Depot (HD) and Lowe's (LOW) note that the extreme weather in January saw an unfavourable impact. 

Fed Views: The Fed will no doubt be watching this data closely for confirmation on the expected pick up in the M/M figures, with Fed's Waller noting that although the data is not out yet, "an estimate factoring in producer prices is that core PCE inflation rose to a 12-month rate of 2.8 percent, and three- and six- month rates rose to 2.4 percent and 2.5 percent respectively." Waller stated that while this is not a welcome development, the Fed has made a lot of progress, and the latest CPI revisions show the progress was not a mirage. Nonetheless, he wants to see a couple more months of inflation data to be sure that January was a one-off and the Fed is still on the right track. The Fed Governor also warned, "I see predominately upside risks to my general expectation that inflation will continue to move toward the FOMC's 2 percent goal." Therefore, Waller supports being patient on Fed policy, concluding his latest speech with the quip, "What's the rush?". 

29 Feb 2024 - 12:20- Fixed IncomeData- Source: Newsquawk