News from the Financial Associated Press on December 23 (edited by Shi Zhengcheng)On the morning of the last trading day before the Christmas holiday, the Bureau of Economic Analysis of the U.S. Department of Commerce released the U.S. personal consumption expenditure data for November. As the basis for the Fed’s decision-making, the data released today is also fully in line with the Fed’s policy goal of “lower inflation and residents tightening their pockets.”
(Source: BEA) In terms of year-on-year data, the PCE data in November rose by 5.5%, and the core PCE data excluding food and energy prices was 4.7%, both in line with expectations and showing that US inflation is on the path of slowing down superior. At the same time, BEA also made adjustments to some data from July to October this year, and individual projects were slightly revised up.
(Core PCE price index, source: tradingeconomics) In terms of consumption data, the US personal index rose only 0.1% month-on-month in November, which is also the weakest performance since July this year. A rise in consumer spending on meals and vacations partially offset a drop in spending on goods, with spending on new cars slumping the most. Behind the upward revision of the final value of the third-quarter GDP in the United States, which caused market shock yesterday, is also the figure driven by consumer spending.
The important reasons for maintaining the purchasing power of consumers are inseparable from the reduction of natural gas prices and the increase of labor wages. In November, the disposable income of workers maintained a growth momentum similar to that in the October report, and the growth rate of disposable income after adjusting for inflation reached 0.3%.
The reason why the market is highly concerned about inflation is naturally inseparable from the concern for the Fed’s monetary policy. When Fed Chairman Jerome Powell finished raising interest rates for the last time this year last week, he said that “more evidence” was needed to believe that inflation was on the right path. The rate hike in February next year will depend on subsequent data.
According to the economic forecast given by the Federal Reserve last week, the median expected peak of this round of interest rate hikes will fall between 5.00% and 5.25%, which means that it is still 75 basis points away from the current level. Fed officials also expect the PCE core inflation rate to fall to 3.5% by the end of next year, which is clearly still some distance from 2%.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said it was also expected that consumers would become more cautious. Because they have now spent half of the excess savings they built up during the epidemic, and there are signs of easing in the highly tense labor market. Ian expects consumer spending to continue to expand in the current quarter, but it would be amazing if that continues into the first quarter of next year.
According to the official schedule, BEA will announce the PCE data for December this year on January 27, 2023.