The monthly US data report for May, including PCE inflation data, was released today at 2:30 p.m. The report was expected to show a slowdown in overall and core PCE measures as well as an acceleration in growth in income and personal spending. However, it should be noted that although PCE is the Fed’s preferred measure of inflation, it is published with a lag from CPI data and therefore may have less impact on markets.
Actual data turned out to be broadly in line with expectations – headline and core CPI slowed to 2.6% year-on-year, as expected by the market, with monthly changes also matching estimates. A surprise was seen in the personal income and spending data, with the former increasing more than expected and the latter increasing less than expected. Overall, this data should not have too much impact on Fed policy.
The market reaction was initially dovish with the US dollar falling and stocks rising. However, gains on indices were erased, while declines in the dollar market were reduced.
US, May data
- Global PCE (annual): 2.6% year-on-year vs. 2.6% expected (2.7% previously)
- Overall PCE (monthly): 0.0% month-on-month vs. 0.0% expected (0.3% previously)
- Core PCE (annual): 2.6% year-on-year vs. 2.6% expected (2.8% previously)
- Basic PCE (monthly): 0.1% month-on-month vs. 0.1% expected (0.2% previously)
- Personal income: 0.5% month-on-month vs. 0.4% expected (0.3% previously)
- Personal spending: 0.2% month-on-month vs. 0.3% expected (0.2% previously)
Source: xStation5
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