Tomorrow morning we’ll get numbers in on Personal Consumption Expenditures. Many of you have heard, at least from me, that this is the Fed’s favorite inflation measure. PCE is kind of like a giant receipt for everything Americans buy. It tracks how much money we spend on goods and services, so tomorrow we’ll find out how and where American’s were spending their hard-earned money in May.
When people are spending freely, it means businesses are thriving and that means the economy is doing swell. When the PCE report starts to show that spending has slowed, it’s taken as an economic indicator of rough times ahead. The Fed uses the inflation tracker within this report to understand how inflation is impacting both businesses and the consumer. We can access consumer behavior through their spending habits.
Here we sit on PCE Eve.
The markets are expecting core PCE to be at its lowest level since March of 2021. We’re hoping for reading of 2.6% year-over-year. That could pave the way for a rate cut later this very year. Especially because the Consumer Price Index released earlier this month already suggested a real, as in genuine not as in major, slowdown in inflation. Since this particular reading will have major implications on the Fed’s monetary policy, it’s likely to be market moving tomorrow.
Say your prayers tonight my friends. If you aren’t too busy watching the first Presidential Debate.
I bet the candidates will have an inside scoop on what PCE is going to come in at so I’ll be reading between the lines on everything they are saying and not saying to try to catch a clue. The labor market is also likely to come up tonight as continuing claims for unemployment are at almost 2M – the highest since November of 2021. This shows that once an American worker is laid off, it’s taking them longer to find a new job.
But, Biden is likely to tout the US economy is still expanding. The final numbers on GDP for Q1 showed growth of 1.4%...Trump will counter that government spending is a big part of that…but before we get too political let’s quit while we’re still ahead.
Sleep tight my friends. With your fingers and toes crossed please.