Core PCE Preview: Forecasts from six major banks, the series has likely peaked

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (Core PCE), will be published at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of six major banks.

Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Commerzbank

“Following weak inflation there in July, we expect correspondingly low values for the PCE deflator as well. The core rate, which excludes the volatile prices for energy and food, is likely to be only 0.1% month-on-month. However, this does not indicate that the inflation problem is solved. Rather, we expect higher month-on-month rates again in the coming months.”

TDS

“Core PCE prices likely slowed sharply in July and to an even slower pace than the core CPI (0.1% vs 0.3%). Shelter weights remain a key cause behind this divergence. The YoY pace likely fell to 4.6% from 4.8% in June, suggesting the series has peaked. Separately, personal spending likely slowed to a still firm 0.6% MoM pace after registering an even stronger 1.0% gain in June.”

NBF

“Still in July, the annual Core PCE deflator may have cooled one tick to 4.7%.” 

CIBC

“With retail sales flatlining in the US in July and services activity limited by the spread of Omicron subvariants, growth in total personal spending likely cooled to 0.4% on the month. However, the weakness in the goods categories will owe largely to the drop in gasoline prices. Personal income likely rose by 0.7%, reflecting strong labor income gains, and implying a rise in the savings rate, although it will remain well below pre-pandemic levels. Annual core PCE price inflation likely subsided to 4.7%. We are largely in line with consensus, suggesting no market reaction.”  

Citibank

“We expect a 0.7% MoM increase in personal incomes in July as both wages and job growth rose more than expected and should support nominal aggregate income growth. We also expects a 0.5% MoM increase in personal spending. We also expect a modest 0.10% MoM increase in core PCE inflation in July and up 4.6% from July 2021.”

Wells Fargo

“We forecast broader personal spending advanced 0.4% last month. Inflation remains the biggest issue for consumers, but the Consumer Price Index points to some moderation in July prices. If our forecast for no change in the PCE deflator in July is correct, real personal spending would rise 0.4% as well.”