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Danske Daily: PCE Deflator Likely To Rise 0.1% M/M

ByDanske Markets
Published 12/23/2013, 02:39 AM
Updated 05/14/2017, 06:45 AM
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Market movers today

Today's main release is US personal spending and core PCE inflation. Following robust retail sales in November, personal spending is expected to rise 0.5% m/m. As the PCE deflator is likely to rise only 0.1% m/m, it should result in a decent rise in real personal spending of 0.4% m/m. US private consumption is currently supported by improving job growth, strong wealth gains and a decline in gasoline prices.

The core PCE deflator is the Fed's preferred inflation measure. We are in line with the consensus expectation and expect it to increase 0.1% m/m giving rise to a slight move higher in the annual rate from 1.1% to 1.2% y/y. The Fed said in its statement last week that it would monitor developments in inflation closely to see if the expectation of a gradual move higher towards 2% is confirmed. However, we believe job growth will be the primary determinant for Fed policy going forward and if monthly increases in payrolls pick up to 250k during H1 14, as we look for, the Fed should be able to live with low inflation.

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