Is inflation made in the USA slowing down? Not according to the preferred parameter of the Fed, the US central bank, i.e. not according to the core PCE.
The figure, contained in the report on consumer spending and personal income, accelerated in January, rising on an annual basis by 4.7%, more than December’s growth of +4.6% (reviewed on rise from the previously announced +4.4%) and well beyond the expectations of analysts, who had foreseen a slowdown of 4.3%.
On a monthly basis, core PCE inflation increased by 0.6%, versus an estimated +0.4%, up from +0.4% in December (revised upwards to +0, 3% previously communicated).
Not only the core component, but also the headline PCE further strengthened, from year-on-year growth of 5.3% in December to +5.4% in January.
Personal incomes instead rose by 0.6%, less than the +1% expected by the consensus, after the 0.3% increase in December (revised upwards from the previous announced increase of +0.2%).
Consumer spending on a real basis grew by 1.1%, compared to -0.3% in December.
On an adjusted basis, consumer spending increased by 1.8%, well ahead of the 1.3% expected and compared to a 0.1% decline in December (revised upwards from -0.2% previously reported known).
If the previous data on US inflation had at least fueled hopes of a slowdown in price growth, albeit at a slower pace than expected, today’s figure – preferred among others by the Fed -, i.e. the core PCE, unleashes the fear that US inflation, the bottom, has not yet reached the bottom.
Last week, the US Producer Price Index for January was released. The data – PPI index – rose in the month by 6% on an annual basis, slowing down compared to +6.2% in December, but definitely beyond the estimates of an increase of 5.4%.
On a monthly basis, the rise in inflation measured by the index was 0.7%, compared to the +0.4% expected and a marked acceleration compared to the previous decrease of 0.4%. Excluding the price components of energy and foodstuffs, the figure also marked a rise of 5.4%, lower than the +5.5% in December, but also in this case well above the +4.9% expected.
Ditto on a monthly basis: core PPI increased by 0.5%, ahead of +0.3% expected and against +0.1% expected.
Even earlier, US inflation measured by the CPI consumer price index had been disclosed, again rising in January at a rate of 6.4% on an annual basis, slowing down compared to the previous increase of 6.5%, but beyond the +6.2% expected by the consensus of economists.
On a month-to-month basis, things got even worse. The figure marked an increase of 0.5%, higher than the +0.4% expected, and markedly up on the previous increase of 0.1%.
This last December trend was also revised upwards from the -0.1% initially reported.
Again on a monthly basis, the core CPI, i.e. the CPI index excluding the more volatile components represented by energy and food prices, rose by 0.4% in January, growing on an annual basis by 5.6%, slower than to +5.7% in December but more than the +5.5% forecast by the consensus.
Today’s data confirms and reinforces fears of an even more hawkish Fed on rates, in its relentless fight against inflation.
Among other things, investors continue to focus their attention on the Fed minutes that were published the day before yesterday, relating to the last FOMC meeting of January 31-February 1, which ended with the announcement of a hike US interest rates by 25 basis points, to a range of between 4.5% and 4.75%, a record since October 2007.
From the minutes it emerged that the risks on inflation are still on the rise, both due to the consequences of the reopening of the Chinese economy and to the war in Ukraine, and that some exponents of the FOMC, in the last meeting, had expressed the desire to raise rates not by 25 basis points, but by 50 basis points.