US: Core PCE accelerates as telecom weighs less – Standard Chartered

Sonia Meskin, Economist at Standard Chartered, notes that US March personal consumption expenditure (PCE) data printed largely in line with their and market expectations: core PCE rose 1.9% y/y and 0.15% m/m, as the sharp drop in telecom prices last year finally fell out of the index.

Key Quotes

“Health-care prices also increased notably, as expected, with a rise in hospitalisation charges reported across other indicators recently. It remains to be seen whether the rise in health-care costs is sustained, but it may be helped by the repeal of the individual mandate within the Affordable Care Act that came with the Tax Cuts and Jobs Act (TCJA) passed at the end of 2017.”

“M/m increases in wages and salaries and goods prices were more modest than in the previous two months, but some giveback was expected after very robust January and February prints. Consumer spending increased as purchases of vehicles and recreational goods rose. Spending on services rose largely for seasonal reasons, buoyed by spending on household electricity and gas. Y/y, disposable income edged up to 3.6% from 3.5% in February, boding well for consumer spending; the savings rate declined to 3.1%, from 3.3% in February, but remains firm. Overall, the report paints a solid picture of the US consumer and of inflation well on the way to the Federal Reserve’s 2% objective as the technical drag on PCE from last year abates. The implications for Wednesday’s FOMC meeting from this report are minimal, as the Committee expected core inflation to accelerate in March and beyond.”